Some local government owned enterprises in China have begun pulling back from funding regional projects in response to a campaign from Beijing to curb implicit liabilities, amid fears of financial contagion.
The outlook for Chinese local government debt in 2023 is gloomy, according to experts, triggering concerns about rising default risks that could have knock-on effects for the state-dominated banking sector.
China’s central bank said in a draft law released on Wednesday that the existing legal framework to mitigate financial risks is disorganised and ‘lacks overall design’.