Finance
Beijing fears local vehicles for infrastructure finance may tank
China is doubling down on stymying the murky fundraising practices in the structured bond market that is exploited by shady fund managers and risky borrowers as the government steps up efforts to tackle the debts amassed by local government financing vehicles (LGFV), which by some estimates have ballooned to 50% of the nation’s gross domestic product.
Beijing fears that these LGFVs, which have been crucial in funneling investment into infrastructure projects, have dipped too far into this perilous segment of the bond market and may default, destabilizing the banking and financial sector and curtailing these key drivers of economic growth, which slowed to 3% last year, the second-weakest in decades.