China’s Next Default Pressure Point Comes Closer

As Beijing reins in its largesse and credit stresses rise in China amid a wave of defaults, investors should wonder where the ructions will appear next, Bloomberg News reported in a commentary. Going by the numbers, local government financing vehicles – with trillions of yuan outstanding – seem primed to come under pressure. Their debt is meant to help raise capital for infrastructure and other public projects. Issuance in the first seven months of the year totaled 2.5 trillion yuan ($381 billion), up 32% over the same period in 2019. These debts come under the oversight of provincial governments through special purpose vehicles, but aren’t always on their balance sheets. They’ve long been considered secure and quasi-fiscal entities. Read more