Cover Story: Fund Manager’s Dark Arts Lift Lid on China’s Debt Mess

China is doubling down on stymying the murky fund raising practices in the structured bond market that is exploited by shady fund managers and risky borrowers, as the government steps up efforts to tackle the debts amassed by local government financing vehicles (LGFV), which by some estimates have ballooned to 50% of the nation’s GDP.

Beijing fears that these LGFVs, who have been crucial in funneling investment into infrastructure projects, have dipped too far into this perilous segment of the bond market and may default, destabilizing the banking and financial sector and curtailing these key drivers of economic growth, which slowed to 3% last year, the second-weakest in decades.