2015-01-28

More Bad News For China Debt

Local borrowing sounds alarm bells
Recent estimates from China International Capital Corporation put local government debt levels at around 22 trillion yuan ($3.51 trillion) by the end of 2014, with 15 to 20 percent of this amount tied up in "highly risky" projects.

The local government bond market is now valued at about 5.6 trillion yuan, most of which will mature in 2016. By that point, local governments could face enormous repayment pressure.

More debt and less growth:

Local govts lower 2015 GDP forecasts
Fifteen provincial-level governments out of 17 that had published their economic growth targets as of Tuesday have cut their forecasts for 2015, to focus on quality and efficiency of growth amid a slowing economy.

Three out of China's four municipalities have lowered their 2015 growth targets. Beijing set its 2015 growth target at 7 percent, down from 7.5 percent in 2014. North China's Tianjin cut the 2015 forecast to 9 percent from 11 percent in 2014, and Southwest China's Chongqing has set a 10 percent growth goal for 2015, compared with 11 percent in 2014.

Many provinces have missed their growth targets for 2014. For instance, North China's Hebei Province saw GDP growth of 6.5 percent in 2014, compared with the target of 8 percent.
The forecasts are still too optimistic: 2015 growth will be slower than 2014.

Shanghai to introduce stress tests for city's banks
Shanghai's banking regulator is requiring commercial banks in the city to run stress tests related to credit for realty development, including credit for developers and home buyers, in a bid to curb risk exposure, Reuters reported on Tuesday.

The report quoted a circular from the Shanghai Office of the China Banking Regulatory Commission dated Monday, saying that the CBRC will continue monitoring risks that may be brought by realty development and credit to property companies outside the city.

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