The extension of credit for a state-owned contractor in Guizhou province has led to concerns that the country’s smaller banks will become caught up in local governments’ debt crises amid increasing pressure to carry bad loans.
China’s weaker local government financing vehicles (LGFVs) are facing higher risks of default and missed payments amid rising financing costs, a wave of maturities and a property crisis that is taking a toll on local authorities’ balance sheets, according to analysts.