Pressure is mounting on China's cash-strapped local governments as authorities move to shut a private funding route for their financing arms, according to planned new rules and people familiar with their aims, raising credit risks and default worries.
Beijing has been tightening rules on local government borrowing for years, curbing access to bank loans and bonds and driving their financing vehicles deeper into private markets to raise money.
One such channel, where fund managers have been selling largely illiquid high-yielding debts from local government financing units, is the next to be shut off.