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Rabobank analysts note that China has announced that local government borrowing is likely to increase yet again  from the already pre-announced CNY2.15 trillion (USD305bn) level of special bond issuance that has already been approved.

Key Quotes

“Let’s recall that officially local governments are not allowed to run deficits; have nonetheless run up vast debts; we were told they were deleveraging; they have already had one  de facto  PBOC bail out; and they are now essentially becoming a normal arm of fiscal policy”¦except that most won’t be able to raise the revenue to ever repay this new (or old) borrowing given their tax-raising ability is mainly via rising land prices. If anything happens to property prices, it’s game over – and yet prices are already so high they are causing social problems and distorting the rest of the economy.”