Taming “Local Government Inc.”

As the central government was battling the global financial crisis with heavy spending and moderately loose monetary policy in 2009, Chinese enterprises went on a borrowing binge. Banks issued them a record 10 trillion yuan in new credit. In addition, direct financing in the form of bonds, initial public offerings and securities trusts exceeded 2 trillion yuan. One source of financing, local governments and their investment platforms, triggered considerable media attention during the year – and much anxiety.