Premier Li Keqiang has stepped up curbs on local borrowings just as LGFVs (local government financing vehicles) prepare to repay 558.7 billion yuan ($89.8 billion) of bonds this year amid economic growth that’s set for the slowest pace in more than two decades. In addition, debt that gets counted as local government debt will get definitive government support.
Therefore, in order to deal with the debt issue, firstly, China’s provinces must submit their reports classifying all local borrowings within their borders including those of LGFVs as either government debt or not by today. Secondly, the government should cut reliance on LGFVs. Thirdly, the government will impose stricter controls on new local government borrowings.