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S&P: Easing of Chinese bond refinancing rules to help local governments

China's heavily indebted local governments are expected to benefit from the reported easing of rules for their issuance of domestic corporate bonds, S&P Global Ratings said.

State-run China Securities Journal reported, as cited by Reuters, that the country's securities exchanges have eased bond refinancing requirements for local government financing vehicles, or LGFVs.

"We believe this is an interim measure to help LGFVs manage refinancing risk, while also supporting infrastructure investment to shore up the economy," Ratings credit analyst Gloria Lu said.

The less-strict rules also signal that China is prioritizing financial stability and fiscal expansion over local-government funding reforms, Ratings added.

"In the longer run, we believe LGFVs will continue to transform their business model, and China will rely on more transparent means to finance local government spending," Lu said.

According to Ratings, statistics show that approximately 500 billion Chinese yuan in domestic corporate bonds by LGFVs will be due in 2019.

As of March 13, US$1 was equivalent to 6.71 Chinese yuan.