China’s central bank is considering extraordinary measures to boost credit flows to heavily indebted local governments, according to local media reports, as Beijing struggles to recapitalise the provinces after years of unsustainable borrowing and investment.
The country’s local debt has surged since the 2008 financial crisis as regional governments borrowed to finance infrastructure projects in an effort to stimulate the economy. Experts have warned that the debt poses a risk to the banking system.
China’s economy is growing at its slowest pace in six years, according to official figures. Policy makers want to enable local governments to maintain infrastructure spending to cushion the impact from a slowdown in the property and manufacturing sectors.