Several SOEs in Jiangsu province settled implicit local government debt, to stop raising funds for local governments

 

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Several state-owned enterprises (SOEs) in East China’s Jiangsu province announced that they have settled all implicit local government debt and will no longer assume fund-raising function for local governments.

Analysts say that the move will help prevent the excessively rapid growth of local government debt and more provinces are expected to follow suit to reduce the number of local government financing vehicles (LGFVs).

Pizhou Transport Engineering Co and Pizhou Yuantong Public Transport Co said that their implicit government debt has been settled, and they will no longer help raise funds for public welfare projects. 

The companies said that they will operate independently and take full responsibility for their profits and losses, according to a statement on the local government website.

Since mid-August, about 50 SOEs have announced similar moves.

According to the latest data from the Ministry of Finance, local government bond issues from January to July this year stood at 4.9872 trillion yuan ($684.79 billion). As of the end of July, the total balance of China’s local government bonds stood at 38.0234 trillion yuan, within the limit approved by the National People’s Congress, the country’s top legislature, of 42.17 trillion yuan.

So far, there have been no public reports of an LGFV default though some have sought loan extensions. In December, Zunyi Road and Bridge Construction (Group), an LGFV in Southwest China’s Guizhou Province, announced it planned to extend the repayment of 15.6 billion yuan of bank loans within 20 years, according to media reports.