China's Local Governments Incurred $1.4 Trillion Debt

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    China's Local Governments Incurred $1.4 Trillion Debt As Of Sept 30 - Report | Fox Business


    SHANGHAI – China's banks had 9.1 trillion yuan (US$1.4 trillion) of outstanding loans issued to local government financing vehicles as of Sept. 30, and at least 65% of these loans were fully covered by cash flows, state media said Tuesday.
    The Shanghai Securities News cited unnamed sources as saying that the Chinese banking regulator has urged banks to curb the increase of loans issued to local government financing vehicles.
    In June, China's top audit office estimated local government debt at CNY10.7 trillion at the end of 2010, or 27% of China's gross domestic product. It remains unclear how much of that is at risk of going bad.
    Local governments in China are generally prohibited from going into debt, but most of them managed to circumvent the law by setting up their own companies to do the borrowing. Supported by land holdings and the promises of officials, such firms found plenty of obliging banks during the lending spree between 2009 and 2010.
    The Financial Times reported Sunday that China has instructed its banks to embark on a mammoth rollover of the loans issued to local government financing vehicles to avoid a series of defaults. Some could be extended by as much as four years, the report said.


    Read more: China's Local Governments Incurred $1.4 Trillion Debt As Of Sept 30 - Report | Fox Business
     
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