Chinese government entities responsible for funding hundreds of billions of dollars in infrastructure projects are struggling to raise cash after a series of defaults by state groups rocked the country’s credit markets.

Executives from several local government finance vehicles (LGFVs) have told the Financial Times that they have abandoned bond sales or loan applications after debt-saddled state-owned enterprises, led by Yongcheng Coal & Electricity Holding Group, defaulted in November. Other LGFVs are paying much higher rates of interest to borrow.

The credit crunch facing LGFVs, which are responsible for funnelling cash to China’s local governments, has raised concerns that defaults at state-owned enterprises are spilling over into other parts of an economy whose recovery from coronavirus has been supported by infrastructure spending.