Bonds to flourish as LGFVs lose flavor

Fiscal deficit plans could put pressure on local government financing, reports Reuters.

China's plan to run its biggest fiscal deficit since the global financial crisis in 2008 may help develop its bond market, but the extra competition for funding could sink some of the major providers of local government financing.

Local government financing vehicles, which were invented to skirt restrictions on local government fundraising, are already under pressure from Beijing's drive to reduce local debt and migrate provincial financing to a more transparent municipal bond model.