BEIJING (Reuters) – China has instructed state-owned banks to roll over existing local government debt with longer-term loans at lower interest rates, two sources with knowledge of the matter said, as part of Beijing’s efforts to reduce local debt risks in a faltering economy.
The People’s Bank of China last week delivered policies to major state lenders that ordered them to extend terms, adjust repayment plans, and reduce interest rates of outstanding loans to local government financing vehicles (LGFVs), according to the sources.
To ensure lenders do not incur heavy losses from the debt restructuring, interest rates on rolled over loans should not be below China’s treasury bond rates, said one source, adding that loan terms should not exceed 10 years.
(Reporting by Beijing Newsroom; Editing by Simon Cameron-Moore)
