Chinese banks in massive rollover of local government debt

Extends repayment of three-fourths of RMB4 trillion.

China's banks have rescheduled some 75% of loans made to the country's local governments that were due to be repaid by the end of 2012. Banks rolled over at least RMB3 trillion of RMB4 trillion in loans and interest rates, said media sources.

Local governments had total outstanding loans of RMB9.2 trillion in 2012 compared to RMB9.1 trillion yuan in 2010. Some 40% of all local government debt had been scheduled to mature in those two years, said the government.

A government report said the implication of a stable outstanding loan volume is that the vast majority of local government loans that were to come due over the past two years have simply been extended. Accounting for interest payments of 6% a year, local governments have paid back a maximum of about RMB1 trillion.

China's local governments borrowed heavily with Beijing's consent to fund massive infrastructure spending at the heart of a RMB4 trillion economic stimulus plan in 2008 in response to the global financial crisis.

This mammoth spend left local governments saddled with debts due to be repaid in many instances far earlier than the projects which the loans funded were due to be completed.