INFOGRAPHIC: China’s local governments start to feel pinch

Rising onshore borrowing costs leads to a rising risk of bond defaults by local-government financing vehicles

China’s local-government financing vehicles LGFVs will face refinancing pressure this year due to their rising funding costs onshore.

Economists and credit analysts expect China’s government bond yields to continue to rise, which will translate into a higher interest burden for the government-linked borrowers.

The 10-year bond yield, a key metric of borrowing cost for LGFVs, rose to 4% in November last year, the highest level in three years, before moderating to about 3.7% as of April 19.

Most of LGFVs’ debt is relatively short term, in the three to five year tenor range, and this is also rising. According to...

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