Local governments plan to use the proceeds of the latest bond sales to purchase equity or convertible bonds from smaller banks, most of them state-owned, effectively recapitalising them, according to the deal prospectuses.
DEEPER IN DEBTThe intensified efforts to support smaller banks also come amid growing worries about the impact of ballooning local government debt on the economy.
While policymakers are highly concerned over rising debt levels, Beijing has little option but to support smaller banks to contain spillover risks, analysts said.
It was not immediately clear if the central authorities had given any guidance to the local governments on recapitalising smaller banks, and who were the buyers of these special-purpose bonds.
"Local governments are a likely the first line of defense whenever regional banks become stressed," they said.
Persons:
Kim Kyung, Gavekal, Zhang Xiaoxi, Pan Gongsheng, Ziyi Tang, Ryan Woo, Sumeet Chatterjee, Kim Coghill
Organizations:
People's Bank of China, REUTERS, Rights, China Electronic Local Government Bond, Authorities, National Financial Regulatory Administration, International Monetary Fund, Beijing, Thomson
Locations:
Beijing, Rights BEIJING, China, Henan, China's, Liaoning, Yunnan, Inner Mongolia