China Increases Regulation On LGFV Offshore Bonds

Estimated read time 1 min read

Chinese regulators have closed a regulatory gap that allowed highly indebted local government finance vehicles (LGFVs) to expand borrowing last year by ordering LGFVs to cease issuing offshore bonds with a term of 364 days. Chinese provincial and local governments established LGFVs to finance infrastructure, but since then, their total debt has grown to around $9 trillion, posing a potential threat to the country’s economy.

The most recent move follows a rush by numerous LGFVs to issue 364-day offshore bonds, ostensibly in an attempt to get around a rule requiring them to apply for permission before borrowing money abroad for periods longer than a year. In January 2023, the National Development and Reform Commission (NDRC) released regulations pertaining to medium- and long-term foreign debt. However, it stated that financing for offshore debt with maturities shorter than a year was not subject to authorization.

DISCLOSURE: All our E.F team members come from an investment background. Apart from writing articles about companies, investments and financial instruments, we also invest in most of them. Please read our terms of use for more details.

E.F Team

Our team at Eastern Finance is made up of young and knowledgeable professionals who are here to provide you with business news from an eastern perspective.

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