2015-02-08

Land Finance Gone, Chinese Governments Can't Pay Their Bills

The dominoes are starting to fall more rapidly now.

China tycoon sues six local governments for late payments
One of China’s richest men is suing six local governments for late payments on infrastructure contracts, in a rare legal action that highlights the risks of unpaid debts cascading through the country’s economy.

Local government borrowing has risen steeply in recent years, with much new credit used to service existing debt, raising fears that local defaults could spark a full-blown financial crisis.

Mr Yan Jiehe, founder of China Pacific Construction Group (CPCG), said on Monday his company’s legal actions were the first such suits launched against local governments. “We will appeal all the way to the Supreme Court if necessary,” Mr Yan told The Financial Times in a telephone interview. “We will surely win this case. The records and evidence are clear.”

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