Who Will Fund China's Growth? Banks to Cut Lending to Local Govt

SCMP: China’s state-owned banks told to stop lending to local governments as debt crackdown intensifies
In a directive full of “must nots”and “shalls” posted on its website last week, China’s Ministry of Finance, under the newly appointed minister Liu Kun, told state-owned financial institutions not to provide any funding to local governments, with the exception of buying government bonds.

At the first meeting of the Central Economic and Financial Commission, the supreme economic decision making body headed by Xi Jinping on Monday, the Chinese president said local governments and state-owned enterprises must cut debt further.

China’s state-owned banks were told to check the registered capital of projects sponsored by local authorities, to appraise borrowers’ real repayment capabilities and not to accept local government’s guarantees for repayment or return, according to the ministry’s directive.
Land sales are a solution, but with the speculative fever draining away, cities will have to sell many more mu to make up for lost bank funding. Maybe muni bonds?

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