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AMDK expert say....Tiongkok LGFV huat big big moment arriving soon.....enjoy
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The US$9 trillion (RM40.7 trillion) of Chinese local government bonds that helped drag the rest of the world out of the 2008 financial crisis are a growing risk this time around.
The bonds funded an economic boom in China more than a decade ago, as local authorities borrowed heavily to invest in everything from roads to subways.
But one of China’s biggest state-run investors advised asset managers overseeing its money to sell some of the debt, Bloomberg News recently reported, intensifying pressure on the securities.
It’s left authorities with the tricky balancing act of defusing a huge risk to the country’s lenders without triggering defaults and destabilising the financial system.
Any implosion of bonds from local government financing vehicles would ripple through the local banking system, further pressuring overall growth in the second largest economy in the world.
The bonds funded an economic boom in China more than a decade ago, as local authorities borrowed heavily to invest in everything from roads to subways.
But one of China’s biggest state-run investors advised asset managers overseeing its money to sell some of the debt, Bloomberg News recently reported, intensifying pressure on the securities.
It’s left authorities with the tricky balancing act of defusing a huge risk to the country’s lenders without triggering defaults and destabilising the financial system.
Any implosion of bonds from local government financing vehicles would ripple through the local banking system, further pressuring overall growth in the second largest economy in the world.
Goldman Sachs estimates that 34 trillion yuan of local government debt sits on the balance sheets of banks it covers.
The potential headwinds to growth would hit an economy whose recovery after the pandemic has already been relatively tepid.
The increased risk is highlighted by the jump in the average coupon on LGFV yuan bonds to 4.39% in the first six months of the year from 3.94% last year despite the fact that China is easing monetary policy.
The potential headwinds to growth would hit an economy whose recovery after the pandemic has already been relatively tepid.
The increased risk is highlighted by the jump in the average coupon on LGFV yuan bonds to 4.39% in the first six months of the year from 3.94% last year despite the fact that China is easing monetary policy.
Far-ranging impact’
“The direct impact of LGFV default would be borne almost completely by domestic investors, but the indirect impact should be far-ranging,” said Brock Silvers, managing director at private equity firm Kaiyuan Capital.“If China’s downturn eventually runs longer or deeper because the old playbook has finally expired, the impact of LGFV profligacy will then be felt on a global economic scale.”
The latest developments add to hurdles for strained local governments in China. A nationwide property slump slashed their income from land sales while public spending jumped during the pandemic.
In a survey published last month, investors across Asia said the ballooning levels of municipal borrowing was the region’s number one financial risk this year.
One of the concerns is that the money raised by the LGFVs was used on projects that typically don’t earn enough returns to cover their debts, leaving many reliant on refinancings or injections of government cash to stay afloat.
Adding to the difficulties, many LGFVs have been essentially shut out of the free trade zone bond market after recent guidance from the People’s Bank of China, a significant blow to the vehicles because they were the most prevalent issuers of those securities.
Tight grip
The guidance shows that Beijing “continues to hold a tight grip on local debt risks and they wouldn’t want a financing channel that lacks regulatory oversight,” said Sherry Zhao, senior director, international public finance at Fitch Ratings.It’s also left issuers from poorer provinces in particular with fewer financing options at a time when investors are souring on risk. That’s left them facing higher borrowing costs just as the average maturity for onshore LGFV bond issuance falls to the lowest since the data series began in 1999, reinforcing the pressure on regulators to defuse the trouble.
“As you get closer and closer to the center of China’s government guarantees, LGFVs are right there on that border line,” said Logan Wright, head of China markets research at Rhodium Group LLC in New York.
“They’re important because if you start questioning the commitment to LGFVs, then what else are you questioning government credibility to defend?”
https://www.bloomberg.com/news/arti...ionwide-push-to-reveal-hidden-government-debt
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China's administrative units use companies called ‘local government financing vehicles’ to borrow money to pay for infrastructure.
Photographer: Qilai Shen/Bloomberg
By Bloomberg News
June 21, 2023 at 7:06 AM EDT
China has begun a fresh round of nationwide inspections to work out how much money local governments’ owe, according to people familiar with the matter, a sign that authorities are preparing to take concrete steps to tackle a key financial risk.
Local officials will be pressed to come clean about their so-called hidden debt as national leaders attempt to get a fuller picture of liabilities across all levels of government, the people said, asking not to be named discussing private information. The campaign is being led by the Ministry of Finance, one of the people said.
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China Begins Nationwide Push to Reveal Hidden Government Debt
Gift this article
China's administrative units use companies called ‘local government financing vehicles’ to borrow money to pay for infrastructure.
Photographer: Qilai Shen/Bloomberg
By Bloomberg News
June 21, 2023 at 7:06 AM EDT
China has begun a fresh round of nationwide inspections to work out how much money local governments’ owe, according to people familiar with the matter, a sign that authorities are preparing to take concrete steps to tackle a key financial risk.
Local officials will be pressed to come clean about their so-called hidden debt as national leaders attempt to get a fuller picture of liabilities across all levels of government, the people said, asking not to be named discussing private information. The campaign is being led by the Ministry of Finance, one of the people said.
https://asiatimes.com/2023/07/china-banks-under-pressure-as-local-debt-crisis-mounts/
Large Chinese banks are under pressure from Beijing to sacrifice their margins and extend new loans to cash-tight local government financing vehicles (LGFVs).
Bloomberg reported that state banks have in recent months been offering LGFVs loans with a maturity period of 25 years, instead of the normal 10 years. Some of the loans came with waivers on any interest or principal payments for the first four years, though the interest will be accrued for later payment, unnamed sources were quoted as saying in the report.
Since the Bloomberg report appeared on July 4, the Industrial and Commercial Bank of China (ICBC) and the Agricultural Bank of China's shares have fallen by 15.1% and 15.6% respectively.
The Bank of China's stocks have lost 12.7% while the China Construction Bank has declined 14% over the same period. Some analysts surmised that the central government is dumping local debt problems on the big banks by making them lend more to developers and expand their loan books generally.
Large Chinese banks are under pressure from Beijing to sacrifice their margins and extend new loans to cash-tight local government financing vehicles (LGFVs).
Bloomberg reported that state banks have in recent months been offering LGFVs loans with a maturity period of 25 years, instead of the normal 10 years. Some of the loans came with waivers on any interest or principal payments for the first four years, though the interest will be accrued for later payment, unnamed sources were quoted as saying in the report.
Since the Bloomberg report appeared on July 4, the Industrial and Commercial Bank of China (ICBC) and the Agricultural Bank of China's shares have fallen by 15.1% and 15.6% respectively.
The Bank of China's stocks have lost 12.7% while the China Construction Bank has declined 14% over the same period. Some analysts surmised that the central government is dumping local debt problems on the big banks by making them lend more to developers and expand their loan books generally.
https://www.google.com.sg/amp/s/theprint.in/world/why-chinas-local-government-debt-nearly-doubled-in-5-yrs-and-why-problem-may-get-worse/1666439/?amp?espv=1
The debt of China’s local-government financing vehicles (LGFVs) has almost doubled since 2017, reaching an estimated 56.671 trillion renminbi (RMB), or roughly $7.8 trillion, in 2022, according to the latest International Monetary Fund (IMF) report on China’s economy.
The rapid increase in debt has raised concerns about the financial stability of China’s local governments, which could add further pressure to the Chinese economy.
Why China’s local government debt nearly doubled in 5 yrs, and why problem may get worse
Debt owed by China’s famed local-government financing vehicles (LGFVs) reached roughly $7.8 trillion in 2022, almost double that of 2017, according to IMF report.
The debt of China’s local-government financing vehicles (LGFVs) has almost doubled since 2017, reaching an estimated 56.671 trillion renminbi (RMB), or roughly $7.8 trillion, in 2022, according to the latest International Monetary Fund (IMF) report on China’s economy.
The rapid increase in debt has raised concerns about the financial stability of China’s local governments, which could add further pressure to the Chinese economy.
Yellen 'eager' to work with China on debt, other global challenges
By David Lawder and Aftab AhmedJuly 16, 20235:23 PM GMT+8Updated 2 hours ago
GANDHINAGAR, India, July 16 (Reuters) - U.S. Treasury Secretary Janet Yellen said on Sunday she was "eager" to work with China on areas of mutual interest, including debt restructurings for poorer countries, and that multilateral development banks needed reforms before capital increases could be considered.
At a press conference before a meeting of Group of 20 finance ministers and central bankers in India, Yellen said her visit to Beijing last week helped put the U.S.-China relationship on "surer footing" and that the world's two biggest economies had an obligation to the world "to cooperate on areas of mutual concern".
Wow......many many big shot sirs pockets are filled pack pack with China debts since hundred of moons ago...bro
There is much more work to do. But I believe this trip was an important start," Yellen said. "I am eager to build on the groundwork that we laid in Beijing to mobilise further action."
Concerns remain about China's unfair trade practices, which prompted Washington to impose tariffs on Beijing. "They really have not been addressed," she said.
U.S. corporations want to see an environment where they could "invest and thrive in China", Yellen said.
Concerns remain about China's unfair trade practices, which prompted Washington to impose tariffs on Beijing. "They really have not been addressed," she said.
U.S. corporations want to see an environment where they could "invest and thrive in China", Yellen said.
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July 16, 20235:23 PM GMT+8Updated 2 hours ago
[1/2]U.S. Treasury Secretary Janet Yellen addresses a news conference during a G20 finance ministers' and Central Bank governors' meeting at Gandhinagar, India, July 16, 2023. REUTERS/Amit Dave
GANDHINAGAR, India, July 16 (Reuters) - U.S. Treasury Secretary Janet Yellen said on Sunday she was "eager" to work with China on areas of mutual interest, including debt restructurings for poorer countries, and that multilateral development banks needed reforms before capital increases could be considered.
At a press conference before a meeting of Group of 20 finance ministers and central bankers in India, Yellen said her visit to Beijing last week helped put the U.S.-China relationship on "surer footing" and that the world's two biggest economies had an obligation to the world "to cooperate on areas of mutual concern".
"There is much more work to do. But I believe this trip was an important start," Yellen said. "I am eager to build on the groundwork that we laid in Beijing to mobilise further action."
Concerns remain about China's unfair trade practices, which prompted Washington to impose tariffs on Beijing. "They really have not been addressed," she said.
U.S. corporations want to see an environment where they could "invest and thrive in China", Yellen said.
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Washington will continue to cut off Russia's access to military equipment and technologies that Moscow needs in the invasion of Ukraine, Yellen said.
"One of our core goals this year is to combat Russia's efforts to evade our sanctions. Our coalition is building on the actions we've taken in recent months to crack down on these efforts," she added.
India, which chairs the G20 this year, has sought a largely neutral stance on the war, generally declining to blame Russia for the invasion Moscow launched in February last year, urging a diplomatic solution and sharply boosting its purchases of Russian oil even as Western nations seek to squeeze Moscow.
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Reuters home
Yellen 'eager' to work with China on debt, other global challenges
By David Lawder and Aftab AhmedJuly 16, 20235:23 PM GMT+8Updated 2 hours ago
[1/2]U.S. Treasury Secretary Janet Yellen addresses a news conference during a G20 finance ministers' and Central Bank governors' meeting at Gandhinagar, India, July 16, 2023. REUTERS/Amit Dave
GANDHINAGAR, India, July 16 (Reuters) - U.S. Treasury Secretary Janet Yellen said on Sunday she was "eager" to work with China on areas of mutual interest, including debt restructurings for poorer countries, and that multilateral development banks needed reforms before capital increases could be considered.
At a press conference before a meeting of Group of 20 finance ministers and central bankers in India, Yellen said her visit to Beijing last week helped put the U.S.-China relationship on "surer footing" and that the world's two biggest economies had an obligation to the world "to cooperate on areas of mutual concern".
"There is much more work to do. But I believe this trip was an important start," Yellen said. "I am eager to build on the groundwork that we laid in Beijing to mobilise further action."
Concerns remain about China's unfair trade practices, which prompted Washington to impose tariffs on Beijing. "They really have not been addressed," she said.
U.S. corporations want to see an environment where they could "invest and thrive in China", Yellen said.
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Washington will continue to cut off Russia's access to military equipment and technologies that Moscow needs in the invasion of Ukraine, Yellen said.
"One of our core goals this year is to combat Russia's efforts to evade our sanctions. Our coalition is building on the actions we've taken in recent months to crack down on these efforts," she added.
India, which chairs the G20 this year, has sought a largely neutral stance on the war, generally declining to blame Russia for the invasion Moscow launched in February last year, urging a diplomatic solution and sharply boosting its purchases of Russian oil even as Western nations seek to squeeze Moscow.
Who bought these debts package as bonds ?? Let me know...
At least the bonds issues by USD by US are more believable. Your get paid.
The US are very open and very transparent about their debts. But the commies had lots of problem their RMB, Economy, employment, corruption, capital flight abroad, confidence..
Who dare load their debt? Even TH is having a tough time swallowing the news that their investment is going to lose 50% of their value with Ant investment.
U will know when time come
Even the wealthy Arabs exchanging their oil with RMB is eager to let go of the RMB and change it to gold immediately.
Theory speaking, I can borrow with low interest from Tiong in RMB and put the money into any foreign banks which offer me higher return .
I just sit down there and wait for the durian to drop without lifting a finger.
Theory speaking, I can borrow with low interest from Tiong in RMB and put the money into any foreign banks which offer me higher return .
I just sit down there and wait for the durian to drop without lifting a finger.
BRICS + gold backed currency will be a game changer... a basket of all currency, resources, put together will change everything....
US only has petrol currency plus brag their GDP and technology economy will not last.... compare to BRICS basket....
US will never able to copy BRICS+ basket.
The china will be happy to let Singapore buy their debt.
Real happy.
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