China imposes stricter LGFV issuance rules

Issues new criteria for denying filings.

The National Association of Financial Market Institutional Investors (NAFMII) has adopted new and more restrictive rules on bond issuance by local government financing vehicles (LGFVs) and infrastructure-related enterprises. NAFMII is in charge of filing for issuance of commercial paper (CPs) and medium-terms notes (MTNs).

Chinese media reports said NAFMII will deny filings for LGFVs and infrastructure-related enterprises that are on the China Banking Regulatory Commission’s supervisory list; are from governments at the prefecture level or below (except for provincial capitals) and are from local governments with a debt-to-fiscal revenue ratio in excess of 100%.

CP and MTN gross issuance came to RMB1.4 trillion in the first 10 months of this year. Most of these were issued by LGFVs. Issuance was RMB2.7 trillion in 2012 and RMB1.8 trillion in 2011.