CFA Features CSPI Ratings ‘Credit Commentary on China’s Public Finance Landscape

01 Jul 2024

On 1 July 2024, CSPI Ratings is pleased to see that our perspectives on Chinese public finance landscape, as discussed in "Non-rating Action Commentary: China Is Reshaping Its Public Debt Structure," have been recommended by the CFA (Chartered Financial Analyst) Institute.

Global Investors: Foreign Investment Fund of Siam Commercial Bank Visits CSCI Pengyuan

07 Jun 2024

May 31 2024, Shanghai, China. The Foreign Investment Fund of Siam Commercial Bank (SCB) visited the Shanghai Branch of CSCI Pengyuan to exchange views about China’s credit landscape.

New Research on the Performance of the Revenue Cash Flow Forecasting Model for Daily Revenue Obligations (DROs) and Daily Revenue Portfolios (DRPs)

30 May 2024

HONG KONG, 30 May 2024. CSPI Ratings has released a research report titled "Back-testing on the Revenue Cash Flow Forecasting Model for Daily Revenue Obligations (DROs) and Daily Revenue Portfolios (DRPs)." This study assesses the predictive accuracy of CSPI Ratings' Revenue Cash Flow Forecasting Model through five months of back-testing. The study indicates that the portfolio prediction errors were -1.01%, 1.12%, -2.85%, -2.07%, and 0.8%. The model also performed well on key metrics such as Bias, RMSE, and Out of sample R². Dr. Chen Ke, Chief Analytical Officer, noted, “The model shows strong predictive accuracy and adaptability to market changes. Accurate cash flow forecasting for DRO portfolios has significant implications for investors and financial institutions.” The study also provides forecasted revenue cash flows for May 2024, which will be evaluated in a subsequent report, offering further insights into model performance and asset class behavior.

Financial Times Features CSPI Ratings ‘Perspective on China's Ultra-Long-Term Special Government Bond Issuance’

13 May 2024

On 13th May 2024, the Financial Times published an article titled "China Fires Starting Gun on $140bn Debt Sale to Boost Economy," providing a comprehensive overview of the arrangements surrounding the issuance of China's ultra-long special government bonds. The article features an in-depth analysis by Mr. Zuo Yiming (Jameson Zuo), Director of CSPI Ratings, on the arrangements for the issuance of these ultra-long special government bonds. Content: The bond sale “comes at a crucial time for China to reshape its debt structure”, said Jameson Zuo, a Hong Kong-based director at CSPI Credit Rating Co, referring to Beijing’s strategy of using more central government borrowing while trying to tackle the mountain of local government debt. “Compared to a global standard, China still has significant room, potentially trillions of yuan worth of bond issuance over the next five to 10 years, to let the central government take up more leverage and boost investments,” Zuo added.

China Is Reshaping Its Public Debt Structure

08 May 2024

China's public debt landscape is evolving with increased central government borrowing and local governments grappling with implicit debt. As of Q1 2024, China's direct government debt ratio is 56.7%, and above 100% in broad terms, highlighting structural inefficiencies. Proactive fiscal policies are crucial amid sluggish economic performance in China. The Ultra-long special sovereign bonds by the central government of China may raise its debt ratio by 5 percentage. In the 2024 National Budget, general public expenditure rises by 4% to RMB28.5 trillion, resulting in a broad deficit of RMB11.1 trillion, up by 25%. Addressing short-term fiscal challenges requires local governments to diversify revenue sources and trim spending. Long-term solutions entail fundamental fiscal and tax reforms, emphasizing strategic coordination between central and local governments. Also, initiatives like the "Package of Debt Resolution Schemes" enhance accountability and mitigate liquidity risks for LGFVs.

2024 Outlook for Chinese Local Government Creditworthiness

01 Mar 2024

In 2023, China’s nominal GDP growth rate lagged behind real GDP growth due to subdued demand. Only seven provinces, including Tibet, Hainan, and Shanghai, surpassed real GDP growth in nominal terms. For 2024, recovery in consumer spending, infrastructure investment, and industrial policies will boost demand, potentially raising China’s producer price index (PPI) and benefiting industrialized provinces. In 2023, local governments faced challenges due to a sluggish land market, resulting in mediocre fiscal revenue recovery. However, sustained financial support from the central government and controlled fiscal expenditures led to fiscal stability. The average deficit-to-budgetary revenue ratio decreased from 17% in 2022 to 15% in 2023. Looking ahead to 2024, local governments may continue to issue special refinancing bonds to bolster their finances. The proactive fiscal policies aim to support economic growth while managing debt burdens. In 2023, prudent fiscal management and central government support improved local government credit profiles. In 2024, moderate economic growth is expected, but fiscal pressures persist due to sluggish land markets and high expenditure. Local government debt may rise, but lower bond interest rates will mitigate interest payments. LGFVs’ creditworthiness depends on effective policies and risk monitoring.

Reviewing the Offshore Bond Issuance of Chinese LGFVs in 2023

19 Jan 2024

In 2023, Chinese offshore Local Government Financing Vehicles (LGFVs) saw a decrease in bond issuance due to US interest rate hikes and stricter controls. The total volume dropped by 34% to $31.2 billion, with 325 issuances, an 11% decrease. County-level LGFVs dominated, indicating a shift to lower administrative levels. China's urbanization spurred local infrastructure projects, increasing the demand for funding among lower-level LGFVs. Regulatory oversight pushed LGFVs towards offshore financing. RMB-denominated bond issuance surged in 2023 due to lower interest rates, comprising 55% of total issuance. The use of Standby Letters of Credit (SBLC) in LGFV bond issuances increased significantly since 2022, reducing financing costs. SBLC-backed bonds yielded 4.4% in 2023, compared to 6% without SBLC. However, the rapid growth of SBLC issuance may not continue due to various factors.

Rising Contingent Liabilities Risk? China Retains Policy Spaces to Navigate Challenges

05 Dec 2023

After the pandemic, the economy of China (AA/stable) is steadily recovering, with per capita GDP reaching USD12,751 in 2022, higher than the upper point of the range (USD6,000 to USD12,000) that corresponds to Stage Three of economic development out of a five-stage classification system under our sovereign rating criteria. Compared to global peers, China's current government debt burden remains at a moderate level. Over the past few years, China's current account balance has consistently remained in surplus, and its net international investment position remains strong. Additionally, China's external debt burden has long been extremely low, with abundant foreign exchange reserves providing a buffer against external risks. We believe that China's economy is entering a crucial transition from ‘high-speed growth’ to ‘high-quality growth’. During this transition phase, despite challenges such as a real estate downturn, high local government debt, and tension in Sino-U.S. relations, we believe that China's institutions and policies continue to demonstrate adaptability and effectiveness, which help to avoid any systemic risks in the short to medium term. Given its ample room and track record of effective policy responses, we have great confidence in China's long-term sustainable growth, expecting its fiscal strength and external position to remain robust.

Assessing the Overall Debt Risk of Chinese Local Government Financing Vehicles

26 Sep 2023

Through data consolidation and analysis, we estimated that the aggregate interest-bearing debt of Chinese LGFVs with bond issuance practices amounted at approximately RMB56 trillion by the end of 2022. Notably, a significant portion of this debt, nearly 80%, constitutes long-term liabilities, aligning with the inherent operational nature of LGFVs. However, despite the substantial scale of RMB60 trillion of total LGFV liabilities, we maintain a measured perspective and do not perceive an immediate cause for alarm. Overall, we are of the view that the eruption of systemic risks stemming from LGFV debt is highly improbable, although localized risks warrant close attention. Also, the "Package of Debt Resolution Policies" can be seen as a strategic approach aimed at effectively tackling the underlying challenges of LGFV debt.

New Research Sheds Light on Micro Connect’s Daily Revenue Obligations and Key Insights into Related Credit Ratings

11 Sep 2023

This study introduces an analytical framework tailored to the attributes and data availability of DROs, an emerging asset class provided by Micro Connect to connect global capital with small businesses. The research explores modelling techniques for predicting cash flow distributions and evaluating risks for portfolios of DROs, known as DRPs, and provides key insights into credit ratings for asset-backed transactions using DRPs as underlying assets. DROs are an innovative financing instrument that provides contractual rights to a predetermined portion of a business's daily revenue over a specified time frame. These unique instruments have the potential to bridge the financing gap faced by small businesses, particularly those in the early stages, by offering flexible financing that better aligns with their cash flow patterns. For investors, DROs offer a unique investment opportunity with differentiated returns, exposure to China's economy, and the potential for higher yields. This study highlights the distinct characteristics of DROs and the challenges they present in terms of valuation and risk assessment. By leveraging high-frequency revenue data at the individual business level, the study provides approaches on how to overcome the challenges in predicting the revenues of small businesses. The proposed analytical framework incorporates business-specific factors, geographic and sectoral influences, and portfolio diversification effects. Simulating cash flow distributions under various economic scenarios provides insights into tail risks. The approach demonstrates remarkable predictive accuracy when back-tested against actual revenue data.

Chinese Government to Take More Proactive Fiscal Approaches to Boost Consumption for the Rest of the Year

17 Aug 2023

During H1 2023, the national public budget revenue reached RMB1,192 billion, marking a 13.3% YoY increase, primarily due to a 96% surge in VAT income. Adjusted for the low base effect, actual VAT growth was 7.2%. Other major taxes declined, highlighting consumption and trade challenges. Expenditure in H1 2023 rose 3.9% YoY, with healthcare, social security, and education showing sustained growth, while urban-rural spending decreased. In July, the central government introduced 20 measures to boost consumption, emphasizing local fiscal proactivity. Local government bond issuance slowed in H1 2023, reflecting a more balanced pace. National fund revenue and expenditure both decreased YoY by 16% and 21% respectively, attributed to a sluggish real estate market. The narrowed revenue-expenditure gap indicates reduced investment expansion. Local borrowing eased, with bond issuances down 12% YoY. Around 1.6 trillion RMB in new issuance capacity remains untapped, supporting fiscal stimulus potential. Looking ahead, local government bond issuance is expected to remain robust, focusing on investment stability and consumption revival.

China civil aviation on recovery path with outlook turning more favourable

25 Jul 2023

In a recent commentary of CSPI Ratings on China's civil aviation, we uncovered a strong rebound of RPK (Revenue Passenger Kilometre) during the first half of 2023, surpassing the same-period levels in 2019 as the pandemic subsides. However, air passenger traffic in and out of China remained sluggish, recording only 23% of the first half of 2019. Despite the recovery in air traffic and revenue, the Chinese airline industry continued to incur losses in early 2023. This was mainly attributed to the slow international air traffic recovery, high fuel costs, and exchange losses. However, on a net non-cash items basis, we estimate that the Chinese airline industry should have achieved cash earnings again in the second quarter of 2023. Looking ahead, we anticipate a further recovery of profitability and cash flow supported by the expected increase in air traffic during the upcoming winter and spring, and more stable oil prices and exchange rate dynamics. As a result, we foresee an improved standalone credit profile for Chinese airlines in the second half of 2023 and beyond. Furthermore, we expect the Chinese government to continue providing support to state-owned airlines.

More Low-tier LGFVs Are Issuing Offshore Bonds, with RMB Issuance Predominating

05 May 2023

The first four months of 2023 saw a significant decline in offshore bond issuance, partly due to rising interest rates by the Federal Reserve and tighter offshore financing policies. Despite this, LGFVs still face significant refinancing pressure and may continue to have considerable demand for offshore borrowing. The lower cost of offshore financing has been a primary factor attracting LGFVs to issue offshore bonds, but since 2022, the cost of issuing onshore and offshore bonds for LGFVs has inverted, with the average issue yield of offshore LGFV bonds continuing to rise. Lower-tier LGFVs are becoming major offshore issuers, and RMB-denominated bonds are growing in popularity. CSPI Ratings also highlight the growing credit profile differences among LGFV issuers at different administrative levels, posing a challenge for international investors.

The Marketization of China's Local Government Bonds Sees Some Progress, but There Is Still a Long Way to Go

25 Apr 2023

In CSPI's view, the central guidance pricing model of local government bonds in China conflicts with the current concept of self-repayment and non-bailout from the central government in local government debt management. Such conflict results in inefficiencies in risk pricing and capital allocation, and a lack of active secondary market and concentrated investor base. Nonetheless, the process of marketization of local government bonds has accelerated in recent years, thanks to various reform policies. In our observation, the yield spreads of LG bonds against Chinese treasuries are narrowing while the differentiation of spreads among provinces is widening, which is more and more closely related to the LGs’ economic and financial conditions. The inconsistency between the issuance pricing mechanism and the secondary trading pricing mechanism persists. In addition, the indistinctive "AAA" domestic rating for LG bonds cannot accurately capture the credit differences of Chinese provinces, which reduces the effectiveness of secondary market trading.

Overview and Trends of the Bond Markets of ASEAN Countries (Chinese Only)

09 Mar 2023

近年来,东盟国家的国际债券市场快速发展,过去十年中,债券的发行量呈现波动上升的趋势。2020年东盟国家的国际债券发行额达到了历史最高的1,081亿美元。然而,受到外部借贷成本的上升以及全球经济增长不确定的影响,2022年东盟国家的国际债券发行量出现了大幅下降,降至2017年以来的最低水平。不过,随着美国加息放缓和货币紧缩周期即将结束,以及中国的快速重新开放,东盟国际债券的发行有望在未来回升。 一些东盟国家的本币债券市场已经发展的十分成熟,具有一定的市场深度和流动性。这些市场可以满足大多数企业的发债需求,发行程序也越来越规范简洁。本币债券市场的投资人对企业较为熟悉和了解,发行成本较国际债券市场为低。本币债券市场的成熟发展,使得东盟企业发行人往往以国内本币债券市场为发行首选。 截至2022年底,东盟国家未偿本币债券总额超过2万亿美元。其中,本币政府债券存量为1.5万亿美元,占本币债券存量的74%;公司债券存量为5,361亿美元,占剩余26%的份额。新加坡、泰国和马来西亚是东盟国家中最大的三个本币债券市场的所在地,而越南的本币债券市场则是该地区最小但增长最快的市场,截至2022年底,其未偿付的债券总额达到了1,057亿美元。

Announcement: CSPI Ratings is awarded the “Public Finance Rating Agency of The Year (2022) - China” by The Asset

27 Feb 2023

27 February 2023, Hong Kong. CSPI Ratings is pleased to announce that we have been awarded with the “Public Finance Rating Agency of The Year (2021) - China” at the Triple A Rating Agency of the Year Awards” is hosted by The Asset, a globally renowned financial publication and media. CSPI Ratings is the only global rating provider with Chinese origin awarded by The Asset.

Review of Chinese USD Bond Market in 2022 and Outlook for 2023 (Chinese)

13 Jan 2023

It was a challenging year for the Chinese USD Bond Market in 2022. The primary market and the net debt increments have significantly dropped, while the secondary market also experienced the most severe round of bearish sentiment, coupled with rising defaults both in the entity count and the scale. In 2023, CSPI Ratings expect marginal improvements in market liquidity and the property sector in general. However, the size of bond maturity in 2023 is still significant, and the credit profiles of local government financing vehicles (LGFVs) across the spectrum will diverge further.

Request for Comments: Group Rating Criteria

20 Dec 2022

Pengyuan International has today published a request for comments on the Group Rating Criteria. The Group Rating Criteria describes Pengyuan International’s approach to assess credit risks for entities that are part of corporates, financial institutions and insurance companies. These criteria lay out steps in determining Issuer Credit Ratings (ICRs) for group entities and their holding companies. The steps include deriving an Overall Group Credit Profile (OGCP) for the overall credit risks of the group as a whole and Stand-Alone Credit Profiles (SACP) for group entities under study, as well as assessing the relation between a specific group entity and other group entities. In addition, these criteria also outline the considerations we have on potential support (or adverse intervention) for a specific group entity from other group entities and/or external parties, for example, a government.

Request for Comments: Environmental, Social and Governance (ESG) Impact on Credit Rating

19 Dec 2022

The awareness of ESG factors and how they may affect issuers’ and their products’ credit profile has significantly increased globally. When carrying out credit analyses, Pengyuan also examines both ESG risks and opportunities that might influence the final rating. In this criteria article, we list the key ESG factors and metrics that we consider and explain how these factors are applied in our various rating criteria. Pengyuan considers ESG factors, both on a quantitative and qualitative basis, when performing credit analysis based on our published rating criteria across all sectors and products. These factors may affect ratings and rating outlooks, with a downward bias in general. This is because ESG factors may affect an issuer’s cash flow and hence impact its capability to fulfill its financial obligations. On the other hand, a strong ESG positioning may not necessarily enhance an issuer’s financial profile.

China’s civil aviation recovery not affirmed, but government support remains strong for national airlines

02 Dec 2022

China’s civil aviation industry has been hit hard by the outbreak of the coronavirus pandemic. On top of significant losses in 2020 and 2021, the top three Chinese airlines' combined revenue fell again by 21% YoY from January to September 2022, due to occasional lockdowns and travel restrictions, while the combined net loss for the period already reached RMB73.8 billion amid a further increase in fuel costs. In addition, these airlines' combined cost of sales (excluding depreciation and amortization expense) was higher than their combined revenue in the first half of 2022, which implies that the Big Three were losing money even on operating cash levels. Looking ahead, IATA still expects the overall global air passenger level to return to the pre-pandemic level by 2024 but expects China to achieve this by 2025. While we believe air traffic in China should return to recovery mode soon as restrictions on domestic and international travel gradually ease, any changes in the outbreak could pose a risk to traffic flows, as has happened over the past two years. On the other hand, we believe the overall creditworthiness of China's aviation industry remains sound despite the lack of recovery in air passenger traffic so far, because of continuous government supports in the format of subsidies and equity injection.

Which Chinese Local Governments Face Greater Fiscal Stress in 2022?

25 Nov 2022

The tax rebate initiative in terms of boosting the economy this year has hindered the fiscal revenue of local governments. Only six provincial-level LGs’ GPBR has seen a year-on-year upswing (natural calibre) in the first three quarters of 2022, and other provincial-level regions’ GPBR declined to varying degrees. Overall, we believe some provincial LGs’ fiscal revenue is under heavy downside pressure, and the transfer payment increment from the central government is insufficient to offset the diminution in LGs’ self-revenue. LGs further rely on special debt and other financing tools to support local fiscal expenditures and infrastructure investment, ensuing an increase in LGs’ leverage. LGs' leverage overall is expected to rise further this year, but under the proactive fiscal policies, their direct debt growth rates may vary under proactive fiscal policies. Against the background of greater downward pressure on the economy, the importance of preventing and defusing LG debt risks is gradually increasing, and some indebted regions are controlling debt growth and leverage. Nevertheless, fiscal revenues in these regions have been significantly suppressed this year, and overall fiscal pressure is still on the rise.

Chinese Property Market: Restoring Confidence Challenges Recoveries

14 Nov 2022

China property sales have fallen rapidly since the third quarter of 2021, driven by weak market demand and tight refinancing. In the first nine months of 2022, residential property sales declined by 29% year-on-year. There has been a marginal recovery since May, especially in cities with supportive policies. In 2023, we expect property sales to stabilize; however, a sharp rebound is unlikely.In our view, a direct bailout is unlikely given the Chinese government’s determination to curb speculation. We expect the government to gradually stabilize the property industry and reduce the industry’s role in the economy. 

Contagion Risks from China’s Small Banks Containable

16 Sep 2022

We expect village and town banks in China to experience more difficulties, particularly in their asset quality and liquidity metrics, as a result of market headwinds and weak economic growth, as well as their inadequate risk management, constant lack of financial transparency, and structural issues inherent to their regions. However, in our view, material spillovers are less likely, as these small and medium-sized banks account for less than 15% of total banking sector assets and the authorities are handling this problem with caution and efficiency.

Auto sector stimulus to drive near-term sales spike in China; long-term impact to be subtle

15 Aug 2022

China’s auto sales momentum has been soft since 2017, even before the coronavirus pandemic outbreak. Given the government’s latest stimulus policy directive for the auto industry, we believe that the central government is determined to ensure that auto sales momentum recovers this time around. while some may be concerned that China’s new PV market is saturated, with rising ownership penetration and traffic congestions, we still believe there is ample room for growth in China’s auto demand, albeit at a slower pace, and domestic PV sales will continue to grow moderately as penetration increases and will not reach a saturation point anytime soon. Albert several negative factors, our view on auto manufacturers’ credit outlook is stable.

Combing through the creditworthiness of regional governments in Sichuan Province

11 Jul 2022

Key takeaways: - Economic development of the prefecture-level regions in Sichuan is relatively unbalanced, showing a pattern of “one superpower and many weak”. - There are considerable gaps among the budgetary strength and debt level of various cities in Sichuan province. - Economic and budgetary strength of the districts and counties in Chengdu has obvious location characteristics. - Liquidity condition of county-level divisions of Chengdu as a whole is better than other prefecture-level cities in Sichuan province. - Sichuan has shown much disparity in stand-alone indicative credit estimates (ICE) of prefecture-level governments. After considering the support of their higher-level governments, the results of indicative credit estimates are relatively concentrated.

Evaluating the Performance of Credit Ratings Using Default Data and Quantitative Measures 2022 (Chinese)

17 Jun 2022

This research utilizes the quantitative assessment approach (i.e., discriminatory power, predictive accuracy and rating stability) outlined in the research report “Evaluating the Performance of Credit Ratings Using Default Data and Quantitative Measures” to assess the performance of credit ratings issued by seven Chinese credit rating agencies (CRAs) from 2014 to 2021. In terms of discriminatory power, we examined whether the CRAs’ ratings can effectively differentiate between issuers that will default within one year. The results of AUROC (Area Under the Receiver Operating Characteristic Curve), AR (Accuracy Ratio) and K-S statistic (Kolmogorov-Smirnov Statistic) show that China Bond Rating and CSCI Pengyuan perform relatively well. In comparison to two years ago, the AUROC of Golden Credit Rating and Dagong Global Credit Rating (Dagong Global) have declined considerably, while the AUROC of the other five CARs have changed just slightly. In terms of predictive accuracy, we evaluated whether the average one-year default rate with respect to each rating level is consistent with the expectations. The findings indicate that China Bond Rating, CSCI Pengyuan and China Chengxin International Credit Rating (CCXI) are the three CRAs with good prediction accuracy, and CSCI Pengyuan has improved its predictive accuracy over the past two years. In terms of rating stability, we assessed the stability of ratings by constructing transition matrices and calculating the frequency and magnitude of the upgrades and downgrades. According to the results, CSCI Pengyuan and CCXI have higher rating stability. Compared with two years ago, Lianhe Credit Rating, Shanghai Brilliance Credit Rating and CCXI have significant increases in their one-year, two-year and three-year affirming rates, while China Bond Rating and Golden Credit Rating saw sight decreases in their the one-year affirming rates .

The Issuance of China’s Local Government Bonds is Set to Peak in June, Fueling the Country’s Proactive Fiscal Expansion

10 Jun 2022

In China, the local governments’ incremental bond issuance is expected to exceed RMB1.1 trillion in June. If revenue from local government-managed funds continues to be sluggish, the special bond ceiling could be lifted. The net financing of local government financing vehicles (LGFVs) is declining, with a potential decreasing trend in the overall hidden debt level of local governments.

Are pandemic disruptions in China bringing woes to local governments’ fiscal revenue?

23 May 2022

The coronavirus pandemic is currently affecting China’s economy, with bigger gaps emerging among provincial regions’ economic development. In the first four months ended April 2022, a total of 29 provincial regions in China reported coronavirus confirmed cases in their jurisdictions. Among these, the cumulative confirmed cases of Jilin and Shanghai surpassed 10,000, while Guangdong, Shandong and Fujian among seven other provinces reported more than 1,000 cumulative confirmed cases. At present, the local coronavirus pandemic continues to evolve in China with uncertainties ahead, hence many local governments are concurrently facing challenges in executing the prevention and control of the pandemic. Those regions with worse local pandemic situations are projected to experience greater pressure on their economic growth this year, in our view. In the short term, the tax refund initiative is curbing local governments’ fiscal revenue, but long-term stability is expected.

Pengyuan International is awarded the “Public Finance Rating Agency of The Year (2021) - China” by DMI

17 May 2022

Pengyuan International is pleased to announce that we have been awarded “The Best Rating Agency of the Year" by CSCI Tecnology Co., Limited, or known as DMI. The voting committee is composed of senior investors with an average of more than 10 years from public funds, banks, securities companies, asset management companies, hedge funds and other fields. DMI is a market leading vertical credit analysis data terminal focusing on China's onshore and offshore bond markets, providing primary market issuance, secondary market quotation, LGFV and real estate in-depth analysis, aiming at providing investment decision-making support for institutional investors and debt capital market teams.

Chinese LGFV offshore bonds see big uptick as SBLC prevails

05 May 2022

By the end of April 2022,the amount of offshore bonds issued by Chinese local government financing vehicles (LGFVs) had surged by 152% year on year. The average issue yield of LGFVs’ offshore bonds continues to decline, extending its advantage over that of LGFVs’ onshore bonds. While direct issuance has been the predominant structure for issuing offshore LGFV bonds, SBLC-backed issuance is becoming more common. The LGFVs from Zhejiang, Shandong and Jiangsu provinces have accounted for over 40% of LGFV offshore bond issuance for the past two years, suggesting a regional concentration in the market.