Skip to main content

China's hidden $5.8 Trillion Hidden Debt


According to S&P Global Rating Chinese Local Governments have accumulated in excess of 40 Trillion Yuan ($5.8 Trillion) of off-balance sheet debts and that defaults are extremely likely to occur.

A team of S&P Economists lead by Gloria Lu reported that much of this debt built up by Local Governments Finance Vehicles do not have the full financial.  “The potential amount of debt is an iceberg with titanic credit risks,”

Defaults are beginning to mount in China

Missed bond repayments in 2018 have already surpassed previous highs

   www.ecocropsinternational.com Defaulted publicly issued bonds in China

With the National Economy slowing due to the growing trade tensions with the USA, the Beijing set of quota for the issuance of local-Government bonds is not enough to fund the old and new infrastructure projects that are used to support regional growth.  Authorities across the country have resorted to LGFV (Local Government financing vehicle) to raise the necessary finance according to Gloria Lu.

This has left the LGFVs “walking a tightrope” between deleveraging and transforming their businesses into more typical state-owned enterprises, the S&P analysts said.
With rising defaults within the LGFV market, the Chinese Government is seeking to roll back a decade’s old practice of implicit guarantees for the debt

The most sensitive LGFVs include the following, in S&P’s analysis:

•    Those tied to weakened prefectural, city or district-level Governments with lenient supervision over state-owned enterprises.

•    Those focused on commercial activities -- thus having lower importance to Local Governments.

•    Those with serious refinancing risks thanks to large short-term debt or reliance on borrowing from the shadow-banking sector.

A shift in Chinese Central Governments thinking is occurring, previously they were focused on reducing leverage in the financial system now they are the focus on funding to sustain growth at the Local level. 

“The markets are right, in our view, to feel more concerned about the sustainability of China’s debt and the increased financial risks,” said Liu Li-Gang, chief China economist at Citigroup in Hong Kong. He also said there will be “renewed pressure” on the yuan.

Even with the Central Government’s shift toward the increased stimulus, however, S&P sees Beijing determined to “bring discipline to the financing practices of Local Governments and their LGFVs.” That ultimately may mean Local Authorities aren’t fully able to keep LGFVs afloat, however, and the bottom line is “the default risk of LGFVs is increasing.”

Comments

  1. investing in oil and gas has and is still making a lot of people " very RICH". Investors in oil and gas are getting rich daily. All you need is a secured and certified strategy that will keep your invested capital safe by opting out with no withdrawer crunch. A considerable number of investors worldwide have seen gains of 75,063%, personally I have made over 600%. For example I started investing with $1,000 and I made $3,000, $3,500- $5,000 weekly. Last year at the start of the year, I increased my invested capital to $10,000 and I made approximately $105,000 before the end of year. I've never seen profit opportunities like this before in any market even when other traders complain of losses. Now for the doubters, not only is it possible, it's actually happening right now. All you need is a good and secured strategy, a good investment platform, Appetite and market conditions. Incase you are interested in venturing into investing or perhaps you are trading and has been losing, feel free to contact total companyat E-mail: total.company@aol.com I will
    be sure to guide and assist you.

    ReplyDelete

Post a Comment

Popular posts from this blog

Bitcoin sees massive sell off- plummets to $5,355

Trumps biomass policy

In 2007 the USA Federal Government passed the US Renewable Fuel Standard which required ethanol blending with domestic oil in large quantities with frequent increases in amounts of ethanol being used.  The bill was passed to reduce the USA carbon footprint and increase the amount of renewable biofuel being used in the USA. Under the Trump administrations, they have been far less supportive of the biomass blending mandate, granting biofuel waivers to major industry players and allowing the trading of biomass credits to develop. Despite the less than active support for biofuel domestically Trump has been pushing his trade negotiators to get big concessions from his Chinese counterparts by asking them to lower their tariffs on biomass in particular biofuel. China's ethanol demand is expected to grow nearly sevenfold as the country prepares to introduce E10 fuel throughout the country next year. E10 fuel is a fuel using 10% ethanol and 90% petrol. U.S. trade negotiato...

European stocks were very mixed up on Monday morning as investors read news on different political events.

Looking at some individual stocks, Vopak rose 5 %after reporting higher results, which wasn't expected. Siemens healthcare also jumped 2.7 % on its current earnings release. European banks were under scrutiny after the latest results of stress tests. Barclays bank and Lloyd's Bank had the lowest capital ratios in the scenario. According to KPMG, this was due to Newly set accounting rules and high levels of unsecured debts Both stocks were pretty much flat. The European Stoxx 600 was flat as well with the various sectors taking different directions. Financial services and industrial Services were down by about 0.6 %, whereas telecommunications had risen by almost 1 %. Italian banks were under pressure in early deals this morning. Though they eased past them. Analysts believe the macro assumptions for Italy were a little too optimistic. Banco BPM and Intesa Sanpaolo dropped about 2 %. Ubi Banca fell 1.4 %. Meanwhile, eurozone finance ministers are gathering in Brussels fo...