China Local Government Unit Escapes Default With Late Payment
- Payment failure prompted concern over state support for sector
- Northeast Securities expects more LGFVs to miss payments
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A Chinese local government investment arm narrowly escaped a bond default, ending yet another scare that could have shaken belief in Beijing’s support for such borrowers.
The latest drama offers a fresh signal that Chinese policymakers remain wary of allowing its heavily indebted regional funding vehicles to fail and destabilize a stressed financial system. Beijing also relies on these local government entities, which have been responsible for China’s infrastructure boom in the past decade, to cope with a sharp economic slowdown and unabated trade tensions.