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New Risks Loom for China Local Debt, This Time in Dollars

  • Lack of dollar assets or cashflows raise repayment questions
  • LGFVs’ dollar bond sales to rise 20-30 percent this year: S&P
Yuan And Dollar Banknotes Ahead Of Tenth Anniversary Of China's Yuan Reform
Photographer: Xaume Olleros/Bloomberg
Updated on

Just when it looked like Chinese local government financing troubles were a thing of the past, a new risk is looming.

The vehicles that grew to gargantuan size during the previous Communist leadership team’s all-out drive for growth have been steadily addressed by current President Xi Jinping’s lieutenants, largely through a Beijing-led bond swap program. Now, units set up by local authorities to fund construction projects are selling debt outside the country -- in dollars.