A top adviser to China’s central bank has warned of a possible “chain reaction” of defaults among the country’s thousands of local government financing vehicles after one of these entities nearly missed a payment this month.
Ma Jun, an external adviser to the People’s Bank of China, called on the government to introduce “intervention mechanisms” to contain the risk associated with LGFVs — special entities used in the country to fund billions of dollars of roads, bridges and other infrastructure.
“Among the tens of thousands of platform-style institutions nationwide, if only a few publicly breach their contracts it may lead to a chain reaction,” Mr Ma said in an interview published on Wednesday in the state-controlled Securities Times newspaper.