In Depth: Local Governments Ditch Financing Vehicles to Offload Hidden Debt

China’s campaign to reduce hidden borrowing parked on the balance sheets of local government financing vehicles (LGFVs) has left many heavily indebted authorities struggling to fund investment and support their economic growth.

Some, including Chongqing, a municipality on an official list of 12 high-risk provincial-level regions, are now attempting to transform some of their LGFVs into market-oriented entities (市场化主体) and offload government liability for the vehicles’ borrowings. The aim is to reduce the authorities’ own debt levels, which they hope will lead to the easing of restrictions imposed by the central government on their ability to borrow money and invest in GDP-boosting projects.