China Cities Face End of Fairy Tale as Default Risks Rise
- Onshore note sales by financing vehicles fell 18% last quarter
- ‘No absolute guarantee’ LGFVs won’t default: HuaAn’s Cheng
Cranes operate as residential buildings stand under construction in Chongqing, China, on Thursday, April 14, 2016.
Photographer: Qilai Shen/BloombergFinance firms that help keep cash flowing to China’s towns, cities and provinces face rising risks of landmark bond defaults just as they turn to global markets for funds.
China’s economic slowdown is weighing on revenue at regional governments, hampering their ability to support the 5.3 trillion yuan ($789 billion) of outstanding onshore notes from local-government financing vehicles, which have yet to suffer nonpayments. Such issuance fell 18 percent last quarter as regulators curbed sales, forcing some to seek funds overseas. Financing units in provinces including Hunan, Jiangsu, Hubei and Sichuan are considering or planning U.S. currency notes, people familiar with the matters have said.