| Officials from some of China’s most indebted provinces and cities have met leading state bankers in Beijing in recent days as they step up efforts to renegotiate debt payments on billions of dollars in liabilities that threaten to constrain growth in the world’s second-biggest economy.
“They are all here to attend the Two Sessions and pay visits to financial regulatory agencies and banking institutions in passing,” one banker familiar with the meeting between Liaoning and state institutions said. Officials from Hebei and Tianjin were seeking to restructure outstanding off-balance sheet debt, the people said, while those from Liaoning hoped to refinance some debt using local state assets as security. Before meeting the banks, the local officials also lobbied state regulators for their blessing to approach the banks, the people said.
China’s local governments have amassed up to 94 trillion yuan in debt, according to an estimate from Goldman Sachs, which includes liabilities from off-balance sheet entities known as local government financing vehicles – investment companies that raise debt and build infrastructure on behalf of authorities.A total of 3.2 trillion of public bonds needs to be repaid by the end of 2024, according to Moody’s.
“The immediate threat of bond defaults has been mitigated,” said Mr Chung, of Moody’s. “Focus has now shifted towards tackling mid- to long-term debt of LGFVs, which, while less likely to cause spillover effects, requires more time to manage effectively.”