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China debt crunch

China provinces rush to address 'hidden debt'

Fears grow over local government finances after multiyear spending spree

Local government entities have been some of China's biggest borrowers.   © Reuters

HONG KONG -- Chinese local governments are rushing to shore up their finances as fears mount that borrowing by the public sector could become the next crunch point for the country's $50 trillion financial system.

Bond sales by so-called local government financing vehicles (LGFVs), which fund infrastructure from roads to schools and factories, soared 76% to 290 billion yuan ($45 billion) in January, research firm Gavekal Research said. Since late December, provincial governments have also issued bonds that could be used to roll over debt, both on and off balance sheets, totaling 500 billion yuan.

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