Most of these 3,000-plus entities were created by local governments during the 2008 crisis to skirt a central government ban on direct state borrowing.
These vehicles had already accumulated 80 trillion yuan of liabilities at the end of 2022, according to analysts at Guosheng Securities.
At a more optimistic 30% discount, the proceeds would jump to 55 trillion yuan, which would cover all outstanding interest-bearing debt.
S&P analysts calculate that about 20 trillion yuan of LGFVs’ loans may be at risk of restructuring.
If Xi won't boost property wholeheartedly and is not able to count on consumers, his efforts to revive China’s growth have to focus on smashing the great wall of local debt.
Persons:
Wen Jiabao, Xi Jinping, Wen, Xi, Peter Thal Larsen, Sharon Lam, Aditya Sriwatsav
Organizations:
Reuters, HK, Guosheng Securities, Citi, Finance, Reuters Graphics, Financial Times, Investment, Oxford Economics, Thomson
Locations:
Beijing, China, Shanghai, New York, China's Southwestern Guizhou, United States