The question of just how much debt China has is a vexing one. After years of investment-led growth, Beijing has struggled at times to maintain economic expansion and political stability. One balancing item has been debt. Local government funding vehicles provide one means to this end. These liabilities, issued off the government’s balance sheet, are worth as much as Rmb40tn ($6tn), says S&P Global. Even as Beijing tries to rein in the country’s borrowing, nothing yet exists to replace these LGFVs.

Replacing these instruments with official debt is a start. But adding LGFVs to reported government data would lead to a government debt-to-GDP ratio of 60 per cent — higher than the maximum threshold the leadership has previously highlighted. Beijing understands the problem. It has been emphasising since 2015 that LGFVs receive no government backstop. Yet the local governments still need more financing for their projects than government limits allow.

These lending caps are slowing economic growth. Gavekal points out that fixed asset investment in the first half declined slightly. Compare that to a 17 per cent gain in the comparable period last year.