Central bank cracking down on ‘zombie’ financing
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)