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A Hunan Local Government Invalidated All Its Government Loan Guarantees Overnight

Well-known Chinese news site Sina recently reported that the government of Ningxiang County of Hunan Province just officially announced that it invalidated all government guarantees to loans that the county government had issued since 2015. The county announcement referred to several policy orders that the central government recently released on prohibiting local governments from providing guarantees for companies seeking loans via financing platforms. For many years, central government policies did not allow local governments to borrow money from the financial market. However, many local governments worked around these policies by providing government guarantees to loans that the companies that work for the local governments had taken out. More and more local governments are taking similar steps like Ningxiang County of Hunan. However, analysts expressed the belief that the sudden invalidation of government guarantees is directly against the spirit of the contracts since the guarantees were part of these legally binding contracts. Many banks and other financing companies are asking for an early pay back of the loans.

Source: Sina, August 23, 2017