China Banks Halt Buying Free-Trade-Zone Bonds in Blow to LGFVs

Chinese banks have stopped buying bonds issued in the Shanghai free trade zone after regulators increased scrutiny of the $18 billion market mostly used by the nation’s local government financing vehicles, according to people familiar with the matter.

The People’s Bank of China in May told lenders that they can only buy notes sold in the China (Shanghai) Pilot Free Trade Zone if the issuers have genuine business operations in the area, said the people, who asked not to be identified discussing private information. There hasn’t been a single FTZ bond sold after June 16, data compiled by Bloomberg ...