China's Local Government Financing Vehicle Borrowing Costs Drop to Record Low

Why do you think it the LGVFV market is so hot at the moment? Is it is it a safe space to get into now? Yeah. So last year they were certainly having a difficult time because as you know, a lot of VLTF is they are not very financially sustainable. So they rely heavily on local government. But the local governments revenue, they have been suffered because of China’s housing crisis, because a large chunk of their revenue actually comes from land sales. But starting from this year, we are seeing like the market has improved a lot. This is partly because the government has introduced a lot of support measures. On the other hand, because China’s stock market has been tumbling and the housing crisis still going on, so investors, they don’t have a lot of alternative to investing that’s make LGV a relatively safe space for them. So what do you what, what measures have we seen so far to kind of ease those investors concerns about liquidity and the debt repayment ability of these LGO fees now? Yeah, one measure is that the government said a refinancing program, they also set up an emergency fund for, you know, cities or regions they may have like difficulty repaying debt. They also highlight 12 K regions or provinces that may have difficulties repaying debt. On top of that, they also increase lending through banks and China’s informal shadow banks as a trust sector. And it brings to mind about shadow banks, right? What sort of role do they play in helping with liquidity situation, right? There has been a resurgence in financing activities from these shadow banks. Our reporting shows that China’s two top transform, they have increased their financing to LGFA’s by 1/3 in the first quarter. The public available data also shows that trust products used to finance LTFS hit a four year high of CN¥138 billion. The first quarter.