, Columnist
How China's Hidden Debt Is Getting Even Riskier
Beijing is allowing certain bond proceeds to be used as project capital. The question now is whether investors will get compensated for the risk.
Build, baby, build.
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In China, debt takes many shapes – on the books, off the books, or buried deep within the financial system. Now, debt can even be considered equity.
In a bid to boost the economy, China this week announced it would allow local governments to borrow more to fund infrastructure investment. As part of this push, it will let municipalities use the proceeds of special-purpose bonds6 as equity in railroad, highway and other projects.3 Previously, local governments weren't able to use such debt as seed capital.