The screws are tightening once again on China's local government financing vehicles (LGFVs) even as pressure on them grows to help fund the country's infrastructure stimulus, adding to concerns that debt defaults will increase and further strain cash-strapped local authorities.
A crackdown on illegal fundraising via local financial asset exchanges (FAEs) and an anti-corruption campaign targeting LGFVs and the intermediaries that broker debt sales are threatening one of the few funding channels still widely open to the vehicles after regulators restricted their access to bank loans and made it more difficult to issue bonds. Trust companies have also reined in credit as they become increasingly concerned about whether they will get their money back.
