Exclusive-China's cabinet curbs debt growth in 12 'high risk' regions - sources
BEIJING - China's cabinet has restricted the ability of local governments in 12 heavily indebted regions to take on new debt and placed limits on what new state-funded projects they can launch, three sources with knowledge of the matter said.
The order also specifies that debt growth of local government financing vehicles should not be higher than average loan growth rates of the corporate sector in the province where the LGFVs are located, two of the sources said. According to the new order from the State Council, local governments will only be permitted to take on debt to fund major projects approved by the state council as well as a few types of projects in key areas. Those projects include the redevelopment of urban neighbourhoods and building affordable housing, two of the sources said.The 12 regions were previously identified as areas with"high risks" of defaulting on debt obligations.
Part of that is debt issued by LGFVs, which cities use to raise money for infrastructure projects, often at the urging of the central government when it needs to boost economic growth.
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