China Covid Shock Sees Beijing Weigh Risky Debt Option Again
- Central bank urges ‘reasonable’ LGFV funding demand be met
- National leverage ratio climbs amid infrastructure push
A woman is tested for Covid-19 at a swab collection site in Beijing on April 25.
Photographer: Jade Gao/AFP/Getty Images
This article is for subscribers only.
China has signaled a willingness to allow local governments to increase off-balance sheet debt again after a crackdown in recent years to bring it under control.
The People’s Bank of China said last week that banks should meet the “reasonable funding needs” of local government financing vehicles, or LGFVs, and not “blindly” suspend or withdraw loans from the companies. The measures were one of 23 listed by the central bank to help boost lending and support industries battered by Covid outbreaks and lockdowns.