Officials from Liaoning and Hebei – two of China’s most indebted provinces – plus the city of Tianjin, took part in extensive high-level debt talks with top state banks in Beijing recently to renegotiate billions in liabilities that could strangle growth without help from national officials, according to a report by the Financial Times, which said the meetings occurred on the sidelines of the ‘Two Sessions’ annual parliamentary congress and showed the importance attached to these concerns given that local governments have amassed up to $13 trillion in debt over the past decade funding a huge infrastructure spree.
The immediate threat of bond defaults has been reduced, according to an executive from Moody’s Investors Service, so the focus has shifted toward mid- to long-term debt held by local government financing vehicles, the report said, adding that Finance minister Lan Fo’an said on Wednesday that Beijing would gradually reduce these risks by cutting the number of LGFVs and pushing local officials to sell stranded assets. Meanwhile, a document showed that over 1,150 state-funded infrastructure projects such as highways and theme parks had been suspended in Yunnan province to limit spending while debts are cut.
Read the full report: The FT.
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