China - LGFV and $9 trillion of debt!

Local governments in China are not allowed to issue bonds but must use Local Government Financing Vehicles (LGFVs) to raise money. They cannot use local taxes to pay these bonds down and finance them by the sale of land. Land sales are down considerably. There is now a growing problem in this sector as local government debt exceeds $9 trillion, or about 50% of China’s GDP:

China’s push to revive the economy this year by increasing infrastructure spending while warding off financial risks is facing headwinds from massive local-government debt, which is more than $9 trillion and growing…

…A sharp drop in income from mainstay land sales and fewer options for raising fresh funds have fuelled concerns about LGFVs’ ability to meet debt obligations and its impact on the broader banking sector and markets.