China debt: Beijing offers support to indebted Guizhou to ensure cash flow, boost investor confidence
- Guizhou in southwest China has struggled to raise funds in recent years in capital markets as a result of its deteriorating credit profile
- Guizhou is reported to have defaulted on at least 68 debt products since 2018, which is the most of all of China’s 31 provinces
China will allow one of its most indebted and poorest provinces to delay debt payments and undergo a restructuring process amid growing concerns that a crisis could break out in the southwestern region that is synonymous with the popular Mao-tai liquor.
The mountainous landlocked province of Guizhou in southwest China, which has a population of over 38 million, has struggled to raise funds in the capital markets in recent years as a result of its deteriorating credit profile.
But since 2018, the province has defaulted on at least 68 debt products, which would be the most of all of China’s 31 provinces, according to Tianfeng Securities last week.
An appropriate allocation of new local government debt limits will be assigned to Guizhou to support the construction of eligible government investment project
“For qualified outstanding hidden debt obligations, China will allow local financing platforms to negotiate with financial institutions to appropriately extend repayment and undergo debt restructuring to maintain cash flow,” the State Council said on Wednesday as it outlined plans to support the growth of Guizhou’s economy.