China edges towards a big bail-out

Chinese buseslgfvgdp are idling. Statements released by a handful of transport companies complain of deteriorating economic conditions and a lack of financial support. In October two in the city of Nanchong, in south-west China, said that they would halt services owing to a lack of finance from municipal authorities. These announcements may seem prosaic, but the intention is to do more than just inform riders about cancelled bus routes. They are aimed upwards at central authorities, says a former state official, and local authorities encourage the statements because they send a signal that all is not well in the provinces. Some have been even more direct, warning that they can no longer pay their debts. Across the country cadres are begging for bail-outs, in ways both subtle and direct. And there are signs that their efforts are beginning to persuade the higher-ups.Local cadres must overcome severe resistance. Officials in Beijing want to avoid picking winners and the moral hazard inherent in bailing-out poorly run localities. Property is at the heart of the problem. Over the past year local governments have used shrinking budgets to stop construction sites from shutting down. Some have drummed up demand by lowering downpayments or making mortgages more accessible. But these efforts seem to be failing. In the first half of November home sales by floor space fell by nearly 20% year on year. Local government land sales have plummeted, squeezing a vital source of income. And thousands of firms run by provincial officials, called local-government financing vehicles (s), face problems. Goldman Sachs, a bank, estimates that such firms sit on 61trn yuan ($8.6trn) in debt, equivalent to about half China’s , and are struggling to make payments.