Latest News:  

English>>Business

Moody's warns on China's local government debt

(Xinhua)

08:15, June 20, 2013

BEIJING, June 19 (Xinhua) -- Local government debt poses a key risk for Chinese banks, Moody's said Wednesday, the latest warning amid growing jitters of financial risks in the world's second largest economy.

The rating agency said in a report that many local government financing vehicles (LGFVs) have seen their cash flow stagnate or decline, while their debt levels have risen.

Among 388 city construction companies Moody's surveyed, only 53 percent of them have sufficient cash to cover estimated debt and interest payments in 2013 without resorting to borrowing more.

Meanwhile, the National Audit Office said on June 10 that the debt of 36 local governments had risen 12.9 percent to 3.85 trillion yuan in the two years to the end of 2012.

"The direct exposures of Chinese banks to LGFVs remain significant despite the central government's recent efforts to limit the growth of LGFV borrowing," the report said, adding that LGFV exposures accounted for 14 percent of total Chinese bank loans at the end of 2012.

While many LGFVs depend on government support to fulfill their debt obligations, local governments are now facing more challenges to cushion possible defaults.

Chinese local governments' revenue growth is slowing down, which will constrain their support capacity. Also, regulators' restriction on shadow banking and property development will also squeeze local governments' money pipelines, according to Moody's.

We Recommend:

Fortune Global Forum's guests visits panda

China calls for dialogue after EU solar panel duties

China-South Asia Expo opens in SW China

Huawei launches flagship smartphone Ascend Mate

3D printing gallery opens in Chongqing, SW China

White collars setting up stalls become popular

B787 Dreamliner misses maiden voyage in China

Computex Taipei 2013 exhibition kicks off

12 Asian business women: Intelligent and beautiful

Email|Print|Comments(Editor:WangXin、Gao Yinan)

Leave your comment0 comments

  1. Name

  

Selections for you


  1. Officers and men in live-ammunition drill

  2. Special operation members in training

  3. Military airplanes hightlights Air Show

  4. A strong mother's bitterness

  5. Only group permitted to carry guns in China

  6. Thousand audition for 'Rich Blind Date'

  7. Sand sculptures delight visitors at Qinghai Lake

  8. Fan spends 260,000 yuan on jerseys

  9. House price rises cool down in major cities

  10. Highlights of ATC Show 2013

Most Popular

Opinions

  1. Political solution the only way out for Syria crisis
  2. GM influx a dilemma for consumers, farmers
  3. China weighs choices on pacific trade pacts
  4. China's effort to restart Mideast peace talks
  5. Cross-Strait hostilities fading away
  6. New points system benefits non-locals' students
  7. China needs to manage forex reserves
  8. China steel price 'to stay low'
  9. FTA will help ease tensions
  10. Wealthy reflect trends in economy

What’s happening in China

Controversial audition for 'rich blind date' -- being pretty is just not enough

  1. Sex tape official stands trial in Chongqing
  2. China braces for natural disaster season
  3. Shanghai releases first food safety blacklist
  4. Fishing boat capsizes off Taiwan, 6 rescued
  5. Hebei to open beach for nude bathing