Cen­tral bank crack­ing down on ‘zom­bie’ fi­nanc­ing

China Daily (Canada) - - NEWSCAPSULE -

China’s cen­tral bank has re­it­er­ated its de­ter­mi­na­tion to root out “zom­bie” lo­cal govern­ment fi­nanc­ing ve­hi­cles this year and en­sure that ur­ban­iza­tion fund­ing moves through stan­dard mar­ket chan­nels.

The bank said in an on­line state­ment that it will “ex­haus­tively clean up” lo­cal govern­ment fi­nanc­ing ve­hi­cles (LGFVs) that “have poor credit, am­bigu­ous func­tions and un­sus­tain­able fi­nan­cial con­di­tions”.

An­a­lysts now be­lieve that many LGFVs can’t cover their debt pay­ments. These en­ti­ties were set up in haste, without any thought given to prof­itabil­ity, and the projects they backed don’t gen­er­ate suf­fi­cient rev­enue to make loan pay­ments. (Photo 1)

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