Chinese Authorities Strengthen Supervision of Foreign Bond Issuance by Lending Platform

The Chinese authorities are increasingly monitoring the issuance of overseas bonds by the LGFV, a local government financing platform.Related sources 3 people revealed.The picture is the national flag of China.2015 year 10 month shooting in Beijing (2022 Reuters / Jason Lee)
Beijing, April 18 (Reuters) - Chinese authorities are increasingly monitoring overseas bond issuance by local government financing platform LGFV.Related sources 3 people revealed.

Some local government lending platforms have tightened the conditions for issuing foreign bonds, as China's Foreign Exchange Administration (SAFE) has instructed them to tighten supervision.

One official pointed out that the policy of the Foreign Exchange Administration has not changed, but the impact of the strengthening of supervision before issuance is obvious."It is certain that new issuance is becoming difficult.In principle, we can only refinance bonds that have matured."

Another source said the aim would be to stop funding from weak lending platforms and avoid the risks of local financial platforms.

"Until now, the National Development and Reform Commission (NDRC) has approved the issuance of foreign bonds, and the Foreign Exchange Administration has only checked them after the fact.The Foreign Exchange Administration may now need to review the use of the funds raised," he said.

The loan platform that meets the conditions can carry out the procedures related to bond issuance directly after registering with the local branch of the Foreign Exchange Administration, it said.

These developments are likely to be due to a series of defaults on foreign bonds by Chinese issuers.

"There will be no change in local government policies regarding the management of foreign bond issuance by investment companies," the Foreign Exchange Administration faxed to a Reuters question.We will continue to implement it in accordance with the current rules."

According to Moody's, about $31.4 billion in foreign bonds on the loan platform maturing this year, more than half of which come from low-rated or non-rated issuers.

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