China examines extent of local government debt - newspaper

BEIJING, Oct 18 (Reuters) - China’s finance ministry has embarked on a fresh investigation into the amount of outstanding debt held by local government financing vehicles (LGFVs) and state-owned enterprises, the 21st Century Business Herald newspaper reported on Tuesday.

The investigation is examining LGFVs’ various funding sources, including not only bank loans, bonds, but also non-bank credits and supplier payables, in an effort to reduce financial risks, according to the report, which cited a notice sent around the provinces by the Ministry of Finance.

LGFVs play a vital role in supporting China’s state sector investment, but have also been a source of non-performing debt in the past.

Transparency has long been a problem for policymakers seeking to understand the scale and potential risks of LGFV borrowing.

Bond issuance by Chinese local government investment vehicles this year exceeded 1.2 trillion yuan as of Sept. 2, more than all of 2015.

Reporting By Shu Zhang; Editing by Simon Cameron-Moore