Hmmmm, now where have we seen this before? China is in the unfortunate situation of having an economy that is showing signs of strain after years of incredible growth. Even worse is that it was the central government who turbo-charged the economy, which worked well on the upside, but will be painful on the downside. They can push the problem down the road - the same way the West has done it - but eventually the bill will still be waiting. Financial Times:
China has instructed its banks to embark on a mammoth roll-over of loans to local governments, delaying the country’s reckoning with debts that have clouded its economic prospects.
China’s stimulus response to the global financial crisis saddled its provinces and cities with 10.7 trillion yuan ($1.7 trillion) in debts — about a quarter of the country’s output — and more than half those loans are scheduled to come due over the next three years.
Since the principal on many of the loans is not repayable, banks have started extending maturities for local governments to avoid a wave of defaults, bankers and analysts familiar with the matter told the Financial Times. One person briefed on the plan said in some cases the maturities would be extended by as much as four years.