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Finance vehicle loans to local govts up in H1 (3)

By Wang Xiaotian (China Daily)

13:27, September 04, 2012

Concerns over the quality of assets related to local government loans have become more intense as the country's economy continues to lose steam and the National Development and Reform Commission accelerates its approvals of local construction projects in an attempt to shore up the economy.

Analysts have calculated that 1.84 trillion yuan worth of the vehicle loans will be due in 2012, and 1.22 trillion yuan will mature next year. Yet, despite predictions of difficulties ahead, figures for the first half showed that defaults weren't as common as expected.

China Citic Bank said it collected all of the loan repayments that were owed it in the first half, while Hua Xia Bank Co Ltd said it didn't experience any defaults in the same period, during which 60 percent of its loans to local financing vehicles became due.

"The amount of outstanding loans increased somewhat in the first half," said Liu Yongsheng, deputy manager of Agricultural Bank of China's risk management department. "But as long as projects still generate sufficient cash flow to cover the repayments, and there are enough mortgages to liquidate, the loans will be safe."

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