China has tightened rules on bank lending to local government financing vehicles LGFVs, in a bid to constrain their mounting debts. But the new leadership’s desire to showcase its capability to ensure economic growth suggests enforcement of the new rules is questionable.
China Banking Regulatory Commission CBRC unveiled the draft guidelines yesterday. They require commercial banks to strictly control the quality of loans issued to LGFVs and closely monitor the repayment of the loans.
The detailed rules set a cap on the outstanding loan value to local governments, put conditions on the creation of new loans and clarify the exposure limits to the different...
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