High credit risks seen in debt repayments
By Hu Xiaocen |
February 6, 2013, Wednesday
|
Print Edition
Print Edition
CHINA'S county-level governments, which have taken high-cost short-term loans, face credit risks in repaying their debts as a huge amount of cash is needed, Standard & Poor's Ratings Services said.
The default risk of local governments' financing platforms could rise significantly in the next two years as the cash flow needs of the county-level governments will remain high, S&P said in a report yesterday.
"The risks are particularly high for county-level governments that have incurred high-cost, short-term borrowings from non-bank financial institutions," said Kim Eng Tan, a S&P analyst in the report.
"Some may find themselves trapped in a cycle. They may have to spend more on infrastructure to generate higher receipts from land sales. And that's just so they can reap enough profits from such sales to repay the debt incurred earlier for infrastructure investment," Tan said.
But Tan noted China could avoid any systemic economic risk from the debt.
The default risk of local governments' financing platforms could rise significantly in the next two years as the cash flow needs of the county-level governments will remain high, S&P said in a report yesterday.
"The risks are particularly high for county-level governments that have incurred high-cost, short-term borrowings from non-bank financial institutions," said Kim Eng Tan, a S&P analyst in the report.
"Some may find themselves trapped in a cycle. They may have to spend more on infrastructure to generate higher receipts from land sales. And that's just so they can reap enough profits from such sales to repay the debt incurred earlier for infrastructure investment," Tan said.
But Tan noted China could avoid any systemic economic risk from the debt.
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