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Under pressure to finance their day-to-day operations as well as invest in more projects to grow the economy, local governments have turned to off-the-books funding sources for cash, despite a Budget Law effective in 2015 banned them from doing so. Experts estimate the figure to be anywhere from 30 trillion yuan to more than 70 trillion yuan.

More than 80% of local government financing vehicles do not have enough operating cash to cover interest payments on their debt, says UBS estimates. These entities are state-owned companies set up to finance infrastructure projects including highways and bridges.