China's Biggest State Banks Offer 25-Year Loans to LGFVs

Chinese state banks are offering extended loans to local governments' borrowing arms, RGIVs, with tenures up to 25 years, compared to the usual 10 years for corporate borrowers. This move aims to support local governments facing financial difficulties due to increased COVID-related spending and reduced income from land sales. The exact impact of these loans is uncertain, but they are part of broader measures to stimulate the economy, including infrastructure investment and interest rate cuts.

What is the new loan tenure offered by Chinese state banks to LGFVs?

• 10 years

• 25 years

• 15 years

• 20 years

What has contributed to the financial struggles of local governments in China?

• Increased land sales

• Reduced COVID-related spending

• Surge in COVID-related spending

• High tax collection rates

Why is it difficult to assess the impact of the loans on the economy?

• The exact amount of loans is unknown

• All LGFVs have received loans

• The loans have fixed interest rates

• The loans are only for a short term

What special terms were given to the RGIV in Guizhou province?

• Interest only for the last 10 years

• Immediate repayment required

• Interest-free for the entire loan period

• No interest for the first 10 years

What broader economic measures are being taken alongside the loan extensions?

• Reducing credit availability

• Increasing interest rates

• Decreasing infrastructure investment

• Cutting interest rates