Chinese local government financing vehicles (LGFVs) are expected to be remain one of the largest issuers of offshore bonds in 2022, after a dry spell across other Chinese companies and developers in particular. Moody’s notes that LGFVs made up ~25% of China’s 2021 corporate debt issuances at $28bn. Pengyuan International notes that year-to-date LGFV issuances have jumped 184% YoY as of the end of April. Data from Refinitiv shows that Chinese companies have seen issuances fall by over 45% YTD, until May 5 with developers making up only 4.3% of total issuances vs. 20% during the same period last year. Moody’s notes that while LGFV issuances are set to grow through the remainder of the year, the growth rate is expected to slow down due to rising interest rates. George Sun, head of global markets for Greater China at BNP Paribas says, “Onshore investors generally [hold the] view that they know the projects and the local government [issuers] quite intimately… This explains why they tend to be more bullish on LGFV bonds than foreign investors, and like both their US dollar and yuan issuances.”

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