China's debt woes continue

China is trying to eliminate risks from its $9 trillion pile of off-balance-sheet local government debt without resorting to major bailouts. That would require provinces and cities, whose borrowing has fueled the world’s biggest infrastructure boom, to cut spending and restructure their debt without significantly slowing economic growth. At the heart of the dilemma are local government financing vehicles, companies set up across China to borrow on behalf of provinces and cities but not explicitly in their own names. Xi’s government has sought to turn the firms into profitable businesses so they no longer need government money to pay interest on their debt. But interviews with employees at six such firms in different cities suggest that the effort is not working in poorer inland areas. Many companies are failing to generate enough revenue to pay interest on their loans, while banks are wary of lending, investors are wary of bonds, bonuses are being cut and viable investment projects are being hard to find, according to employees who spoke to Bloomberg.