The next China crisis? Local Government Financing Vehicles
CHINA ADVISORY
- Report
20 Sep 2022
by Andrew Collier
The Chinese government is transferring a significant portion of the risks of the property sector from private developers to local government companies. These LGFVs (Local Government Financing Vehicles) are required by local governments to acquire land — replacing property developers — to support the property market. The LGFVs are funded with a combination of bonds and bank loans to finance these investments. This tacit agreement between LGFVs, local governments, and commercial and state banks increases local government debt without making this explicit.
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