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China Officially Doubles Down On Multi-Trillion Yuan Debt Swap Program

Last week, in “China May Double Down On Debt Swap As ABS Issuance Stumbles,” we discussed the likelihood that China’s local government debt swap pilot program would be expanded in the very near future. To recap, here’s what you need to know about the refi effort: China’s local governments are sitting on a pile of debt that amounts to around 35% of GDP. That’s a problem because some of this debt was accumulated off balance sheet through LGFVs (an effort to skirt official restrictions on borrowing via shadow banking conduits) meaning in some cases yields are far higher (at roughly 7%) than they would have been otherwise.
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