Default Risk Rises for Local Government Financing Vehicles, Fitch Says
(Beijing) — International credit ratings agency Fitch Ratings Inc. said the default risks on bonds issued by China’s local government financing vehicles (LGFVs) are rising this year as Beijing tightens the screws on local government borrowings.
“Risks for some LGFVs to default on their bonds are rising in 2018 as financing conditions have continued to turn tight,” said Terry Gao, Fitch Ratings’ senior director of international public finance, during the company’s China Credit Conference on Tuesday.
However, a systemic crisis is “rather unlikely” as the overall risk is still under control.
Defaults by even just a few LGFVs could trigger a repricing of the market, which may cause a short-term liquidity crisis at some companies, and some firms’ ability to refinance their maturing debt could be undermined, he warned.
LGFVs are special-purpose vehicles set up to raise money for local infrastructure projects such as roads, bridges and city rails.
Chinese leaders have listed containing major risks, especially financial risks, as one of their top three priorities over the next three years. The Ministry of Finance in a notice issued late last month reiterated that state-owned financial institutions must obey a ban on providing financing to local governments in any form other than buying their bonds.
Days before that, the ministry told local governments to step up the monitoring and prevention of debt risks in their jurisdictions, identify high-risk areas and report them to special local government leading groups in charge of debt.
Looking ahead, Gao said, it is unlikely that local governments would bail out potential defaults by LGFVs with their fiscal income. But the authorities could arrange short-term liquidity support by financial institutions for the companies to stop the risks from spreading.
Contact reporter Pan Che (firstname.lastname@example.org)
Jan 24 06:56
Jan 24 06:01
Jan 24 02:16
Jan 23 18:30
Jan 23 16:00
Jan 23 10:48
Jan 23 05:58
Jan 23 03:49
Jan 23 03:41
Jan 23 03:09
Jan 22 15:44
Jan 22 06:31
Jan 22 03:47
Jan 22 03:06
Jan 21 17:02
- 1Wuhan Virus Latest: More Domestic, Foreign Governments Raise Alarms as Confirmed Cases Surge
- 2Reporter’s Notebook: We Stayed in Wuhan as the Last Trains Pulled Out
- 3Wuhan Virus Update: Health Expert Warns of ‘Super-Spreader’ of Viral Pneumonia
- 4How Did Two Women Drive a Luxury SUV Into the Forbidden City?
- 5After Layoffs, Oracle Executive Vows to Stay in China
- 1Power To The People: Pintec Serves A Booming Consumer Class
- 2Largest hotel group in Europe accepts UnionPay
- 3UnionPay mobile QuickPass debuts in Hong Kong
- 4UnionPay International launches premium catering privilege U Dining Collection
- 5UnionPay International’s U Plan has covered over 1600 stores overseas