China’s $1.6 Trillion LGFV Bond Market Shrinks by Most in Years
- Net financing turned negative for third straight quarter
- Trend comes amid government’s efforts to rein in risk
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China’s local government financing vehicles are chipping away at their $1.6 trillion pile of debt, as regulators aim to curb the sector’s credit risk.
LGFVs saw their largest quarterly financing outflow in the second quarter since Fitch Ratings Inc. began to track the data in 2018. Net financing — new yuan bond issuance minus maturities — for the period came in at negative 179 billion yuan ($24.6 billion), marking the third consecutive quarter of net outflows.