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Key risks to the global outlook
A lack of transparency and a convoluted financing system have raised fears that the problems of China’s property development companies and the spillover to local government financing vehicles (LGFVs) could result in banking failures. We think the risk of a systemic crisis is low. LGFVs developed out of the limitations of tax revenue raising for local governments and have been a way for local governments to boost expenditure on infrastructure and invigorate the local economy. Local governments are usually the sole or dominant shareholders of the LGFV, which issues debt that may be bought by banks and other financial ... (full story)