Shang­hai de­nies city has debt prob­lems

Shanghai Daily - - TOP NEWS - Ly­dia Chen

THE Shang­hai govern­ment has de­nied me­dia re­ports that one of its in­vest­ment ve­hi­cles had se­ri­ous debt prob­lems and was un­able to re­pay bank loans since ear­lier this month.

All the govern­ment- con­trolled in­vest­ment ve­hi­cles are run­ning well and the fi­nan­cial sheets of Shang­hai Cheng­tou, a com­pany owned by the mu­nic­i­pal govern­ment which fo­cuses on real es­tate and high­ways de­vel­op­ment, are “very healthy,” city spokesman Chen Qi­wei told a press con­fer­ence yes­ter­day.

His re­marks were in re­sponse to a story in yes­ter­day’s Hong Kong Eco­nomic Jour­nal which said that a city govern­ment in­vest­ment firm had stopped pay­ing loans and had asked for an ex­ten­sion. The re­port cited uniden­ti­fied peo­ple.

Ac­cord­ing to the re­port, the firm had put up govern­ment build­ings and city high­ways as col­lat­eral so it could change liq­uid­ity loans, which have a shorter pay­back pe­riod, to longer-term fixed as­set loans.

How­ever, as govern­ment build­ings and city high­ways can not be traded in mar­kets, its abil­ity to re­turn the money was in ques­tion, the news­pa­per said, with­out nam­ing the com­pany or the size of the debt.

It added that the un­named com­pany had is­sued bonds and re­ceived bank loans in 2008 and 2009 af­ter China in­tro­duced a 4 tril­lion yuan ( US$ 618 bil­lion) stim­u­lus pack­age to spur the econ­omy amid the global fi­nan­cial cri­sis.

Some of the loans are close to ma­tu­rity this year, the re­port said.

Zhou Dao­hong, speak­ing for Shang­hai Cheng­tou, told Sina.com that it was not the firm men­tioned in the Hong Kong re­port. Cheng­tou had al­ways paid its debts and in­ter­est as re­quired, Zhou said.

Shares in Shang­hai Cheng­tou Hold­ing Co, a listed firm un­der Shang­hai Cheng­tou, shed 1.71 per­cent to close at 8.06 yuan yes­ter­day.

Ba n k s in t he Chi­nese main­land stock mar­kets have been fall­ing for weeks on in­vestor con­cern over hid­den li­a­bil­ity risks from lo­cal govern­ment fi­nanc­ing ve­hi­cles.

China’s lo­cal gov­ern­ments are in 10.7 tril­lion yuan of debt, the Na­tional Au­dit Of­fice said on Mon­day.

Nearly half the debt was made through fi­nanc­ing ve­hi­cles.

Bank loans were the source of 80 per­cent of debts, top­ping 8.5 tril­lion yuan as of De­cem­ber 31 last year.

Caixin Mag­a­zine re­ported that a govern­ment in­vest­ment firm in Yun­nan Province had filed a no­tice to lo­cal banks say­ing it was only able to pay the in­ter­est on its debts.

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