Record US$651 billion due: China’s LGFVs repay in 2024!

In 2024, China’s local government financing vehicles (LGFVs) must repay a record amount of maturing local bonds, totaling $651 billion. This poses a challenge for the central government’s program to refinance LGFV debt and avoid default. LGFVs borrow on behalf of provinces and cities to finance infrastructure projects, and last year authorities introduced a program allowing local governments to swap some LGFV debt for lower interest rate bonds. Although this program only covers a fraction of the estimated $9 trillion in debt held by these companies, it has helped ease investor concerns and led to a surge in early debt repayment. Amidst a deep property slump and a slowdown in the broader economy, there may still be liquidity pressure on LGFVs and some riskier provinces may run into trouble with their maturing debt.