China’s latest measures to deal with the financial risks of local officials have centered on a massive debt-swap plan, but a companion step is now drawing attention as a possible new tool.
Ever since China unleashed a massive wave of credit to stoke its domestic economy in the depths of the global financial crisis, policymakers have been dealing with the dangers posed by a structure on which that wave relied — the so-called local government financing vehicles (LGFVs). Now, economists see potential for “central government financing vehicles” to displace some of that activity, with greater oversight by national authorities.
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