PBOC’s Zhou Says LGFV Reliance on Land Sales Is ‘Problem’
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Chinese local government financing vehicles’ reliance on land sales and rising land prices to repay debt creates “problems,” People’s Bank of China Governor Zhou Xiaochuan wrote in a commentary.
LGFVs are similar to municipal bonds in more mature markets, with both relying on future income to fund repayments, Zhou said in comments published on the central bank’s website yesterday. The difference is that Chinese financing platforms rely on land sales and not tax revenue for income, he wrote.