Chinese state-owned companies revive banned bond sale scheme
In China, financial companies, in particular LGFVs (local government finance vehicles), have found themselves in a difficult position due to a lack of funds to refinance their large debts. To solve this problem, some of them began to use illegal schemes when selling bonds, offering investors much higher yields than the officially set ones. In particular, in the second quarter, they placed $3.3 billion worth of bonds, promising yields of up to 16%.
Source Minfin
To circumvent securities market rules, LGFVs use various schemes, including additional undocumented payments to investors, disguised as "advisory services." These actions undermine the entire Chinese bond market and could have serious liquidity implications. The rescue programs from Beijing are not bringing the desired results - the need for external financing is growing, summarizing that Chinese provincial companies remain in a financial crisis.
