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A total of 48 local government financing vehicles were overdue on commercial paper, which typically carries a maturity of less than a year, marking a new record high and increasing from 29 in the previous month, according to data compiled by Huaan Securities Co. based on data from the Shanghai Commercial Paper Exchange.
Their missed payments amounted to 1.86 billion yuan ($259 million), versus 780 million yuan in June.
That is set to aggravate concerns about the financial health of LGFVs, which are mostly tasked with building infrastructure projects that may take years to generate investment returns. While none of them has defaulted on a public bond, their repayment risk has come under renewed scrutiny after China’s state pension fund recently advised asset managers handling its money to sell some notes including those from riskier LGFVs.
In data current through July this year going back to August 2021, the eastern province of Shandong accounted for 37 of the 140 LGFVs that have missed commercial paper payments in that period, followed by 21 from Guizhou, its impoverished peer in the southwest.