The Shanghai Stock Exchange has launched a new plan to encourage the sale of local government bonds by securities firms in exchange for direct benefits from China’s biggest bourse.
The Shanghai bourse has reportedly incentivised the sale of local government bonds by offering a range of rewards to the 20 securities firms that managed to offload the largest volumes.
These incentives include more rapid approvals for corporate bonds and asset-backed securities (ABS) that these firms plan to underwrite, as well as priority access to ABS for public-private partnership infrastructure projects proposed by local government.
Efforts by financial regulators to deleverage the Chinese economy has hit the demand for local bonds. According to data from financial data provider Wind Q1 local government bond issuance was 474.5 billion yuan (approx. $68.7 billion) in Q1 2017, for a year-on-year drop of over 50% compared to the same period last year.