...Fitch Ratings believes the Chinese government's recent measures point to a shift towards a more proactive strategy in bridging local and regional governments' (LRGs) funding gap and tackling their hidden debt. Measures include the issuance of more than CNY1.4 trillion in special refinancing bonds to swap hidden debt that was mainly borrowed by local government financing vehicles (LGFVs) and additional sovereign bonds to shoulder a bigger proportion of infrastructure spending, as well as more stringent control over LGFV debt growth. We believe these measures have significantly mitigated the short- term debt risk, especially for weaker regions, which obtained most of the incremental bond quota amid their refinancing difficulties. However, this has raised the interest expense directly serviced by LRGs, while the government measures are most likely insufficient to constitute a long-term solution....
