Infrastructure investment has been a key driver of China’s growth since the financial crisis in 2009, with much of the spending coming from companies owned by local governments. But many of these companies now appear set to wither or die, creating a corresponding drag on the economy.

Bond issuance by Local Government Financing Vehicles (LGFV) fell 54 per cent year on year during the first five months of the year, mainly because rising coupon rates made such financing too expensive. Scores of issues have been cancelled.

In the second half of the year, this trend is likely to continue or intensify, according to Miranda Carr, senior China strategist at Haitong Securities. “(LGFVs) are struggling to refinance,” Ms Carr said. “Water, transportation, power and construction projects may be delayed, adding to the overall economic pressure in the second half of the year.”