Record Defaults Hit $800 Billion Chinese Local Debt Market
- Retail investors struggle to get repaid despite state support
- Defaults of non-standard debt have risen to record levels
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Defaults in an opaque corner of China’s local debt market have surged to a record high, ensnaring investors who’d assumed the securities had an implicit guarantee from the state.
It wasn’t supposed to be this way. Last year, confronted with a wave of bad debt issued by municipalities’ financing arms, the country’s central government took action. It gave local governments permission to raise around 2.2 trillion yuan ($309 billion) in new bonds to help repay creditors and ordered state banks to provide additional refinancing support.