Amid the current wave of enthusiasm for offshore bonds from Chinese local government financing vehicles LGFVs, investors should exercise caution when choosing where to invest. The sector is a minefield of credit risk.
The issuance of LGFV US dollar bonds this year has already outstripped that of the last couple of years. So far, bond sales have surpassed $6 billion, which is more than the $4.8 billion for the whole of last year and the $2.2 billion for the year before, according to Bloomberg data.
The substantial increase of LGFV offshore issuance in 2018 and 2019 means that avoiding the sector altogether can result...
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