Neues von der chinesischen Krise:
Contagion is spreading into the deep tissue of China’s political economy. What began as a property crisis — characterised by slumping apartment sales and a rash of debt defaults by developers — is now morphing into a financial crunch at the local government level.
With the market slump, thousands of local government financing vehicles (LGFVs), which since the financial crisis have provided the main impetus behind China’s investment-driven growth, are either running short of funds or teetering on the brink of unprecedented defaults, analysts say.
…One of the next twists, according to Wright, is likely to be unprecedented defaults by LGFVs on the domestic bonds they issue. If LGFVs do default, it will signal the crossing of a “Rubicon”, he says.
This is partly because these bonds — which have financed the construction of roads, railways, power plants, airports, theme parks and hundreds of other pieces of infrastructure — have been assumed to enjoy an implicit government guarantee. More materially, such defaults could also destabilise a $7.8tn mountain of debts built up by such LGFVs, sending chills through an already cooling economy.
With the market slump, thousands of local government financing vehicles (LGFVs), which since the financial crisis have provided the main impetus behind China’s investment-driven growth, are either running short of funds or teetering on the brink of unprecedented defaults, analysts say. Local governments have long depended on land sales to property developers to balance their books.
…The European Chamber of Commerce in China this month put out its “most dark [position] paper ever”, according to Jörg Wuttke, chamber president. The chamber warned that “European firms’ engagement [in China] can no longer be taken for granted” and added that China was quickly losing “its allure as an investment destination”.
