, Columnist
China’s Next Default Pressure Point Comes Closer
Beijing wants to keep troubled local debt vehicles at arm’s length. This determination will be put to the test.
Beijing won’t let local governments use Covid-19 to excuse poor risk management. Above: Wuhan returns to normal.
Photographer: AFP/Getty
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As Beijing reins in its largesse and credit stresses rise in China amid a wave of defaults, investors should wonder where the ructions will appear next.
Going by the numbers, local government financing vehicles – with trillions of yuan outstanding – seem primed to come under pressure. Their debt is meant to help raise capital for infrastructure and other public projects. Issuance in the first seven months of the year totaled 2.5 trillion yuan ($381 billion), up 32% over the same period in 2019.