China faces a financial squeeze and stress point at the end of the year as local governments have around 40% of total debt and guarantees maturing. To calm this China’s finance minister is just out on the wires saying that they may allow government to issue new bonds to replace some of the current debt. A draft document says that a grace period will be given for governments to use existing funding channels until the end of 2015.
China’s local governments have been investing into construction and other infrastructure but have increased the amount of unregulated local government financing vehicles (LGFV’s) Total borrowing was up to around $2.9tn to the end of June 2013.
The Chinese government want to bring this and borrowing under control and so are open to the risks they face towards the end of the year.
