FT Alphaville reports on recent analyst notes about China’s Local Government Financing Vehicles.

I also recommend the section on local government financing in Peter Hessler’s Country Driving. Hessler says that much of China’s infrastructure spending is by local governments, and much of that is financed by an arbitrage: kick peasants off their land, which the local government controls, for minimal compensation (or none, if you can get away with it), have the land re-zoned from rural to urban, and sell it to developers or industrialists at a vastly inflated price.

So much thinking about China seems to be of the “this time it’s different”, “China is a special case” type. When the music stops on either of these rackets, there could be big problems.