China Directs Banks to Restructure Local Government Debt to Cut Risks

China has told banks to roll over local government debt with longer loans at lower rates to reduce risks.

Local government debt is high, reaching 92 trillion yuan in 2022, or 76% of GDP.

Debt is from local government financing vehicles (LGFVs) that fund infrastructure.

The central bank ordered banks to extend terms, adjust repayment, and cut interest rates on LGFV loans.

This is to help highly indebted municipalities and address property sector crisis.