Chillin' out till it needs to be funded
FT reports a new map from the credit boom of 2009:
On Sunday, China’s governing State Council ordered local governments to overhaul these vehicles and instructed banks to restrict lending to them.
It said it would shut these vehicles or prevent them from financing operations if they rely primarily on government funding to repay loans for public projects.
The CBRC estimates outstanding loans to the 8,221 funding vehicles set up by local governments surged 70 per cent last year to Rmb7,380bn. These loans now account for about 20 per cent of all outstanding bank credit.
Thus CBRC is already treading a thin line. Though there is nothing to say that China’s over 600mn urban residents that still make only 47% of the population and the real estate bubbling up can do anything to stop the next 280million hoping to migrate to cities in the next couple of decades. While Citi, GS and even BAC continue to close new funds partnering these local governments, the jury is out on whether these city administrations can keep away from burdening the government to pay back these loans. Thatss $1T to build new cities that India will take a decade to fund and greeece and spain each take a decade to pay back!