Caixin
Jan 11, 2019 05:28 AM
FINANCE

Court Ruling Shows Bank’s Bet on Government Can Be Costly

Beijing has taken steps to rein in government debt guarantees amid concerns over hidden liabilities. Photo: VCG
Beijing has taken steps to rein in government debt guarantees amid concerns over hidden liabilities. Photo: VCG

* The ruling breaks financial institutions’ “blind” reliance on implicit local government debt guarantees and has symbolic significance, experts say

* Beijing has restricted local governments from providing loan guarantees to local companies in an effort to rein in hidden debt risks. But such practices have widely persisted

A recent court decision on a debt dispute between a major commercial bank and a Hunan government body sent another signal to Chinese lenders that governments may no longer be the last resort in defaults.

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