First LGFV default likely this year

China is likely to see the first case of a default by a local government financing vehicle this year, said Zhang Zhiwei, chief China economist with Deutsche Bank AG.

"The sooner the default happens, the better it is for investors ... as it could improve the pricing of risky assets and help policymakers solve the high financing costs in the market," Zhang said during a news conference in Beijing on Monday.

Shandong province recently issued a regulation which stated that the provincial government will not bail out governments at county level in case of debt default, making it the first province in China to step up curbs on local government financing vehicles.