China Halts Sale of Derivatives Linked to Offshore LGFV Debt

China has taken another step to limit domestic investors’ exposure to offshore debt issued by local government financing vehicles, according to people familiar with the matter.

The National Association of Financial Market Institutional Investors, the country’s interbank market watchdog better known as NAFMII, has halted registration of new credit-linked notes, a derivatives product, that use offshore LGFV debt as underlying assets, said the people who requested anonymity for discussing private information.

While the NAFMII earlier this month told some brokerages who are major issuers of CLNs that the suspension is temporary, it didn’t indicate when it may be lifted, the ...