Shenzhen floats idea of selling bonds directly in Hong Kong and Macau in China first

Shenzhen’s finance bureau has floated the idea of selling local government bonds in Hong Kong and Macau

If the plan goes ahead, the city will be the first local government to sell bonds directly beyond mainland borders

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Shenzhen reported economic growth of 7 per cent last year – in line with its target – showing a surprising rebound in the last quarter. Photo: AFP

Published: 6:00pm, 10 Jan 2020Updated: 8:09pm, 17 Feb 2020

Shenzhen is exploring the possibility of issuing offshore government bonds in Hong Kong and Macau to tap into foreign investors and boost the local economy, according to an official report.

The plan was proposed by Shenzhen’s finance bureau at the annual local legislature meeting this week, partly to increase connections between financial markets in the two cities, said a report from the official Shenzhen Special Zone Daily.

If the plan goes ahead, it would be the first direct offshore bond issuance by a local government in China.

The announcement came as the city reported economic growth of 7 per cent last year – in line with its target – showing a surprising rebound in the last quarter after growth slowed to 6.6 per cent over the first nine months of the year.

In the past, provincial and lower level governments have relied on local government financing vehicles (LGFVs), which are state-backed, to function as proxies for them to raise funds by issuing offshore bonds. In June last year, to contain financial risk, the central government restricted LGFVs from issuing offshore bonds and ordered local governments not to guarantee the loans.