Bond investors beware: the Middle Kingdom is splitting down the middle.
Increasingly, international investors are being drawn to China’s debt markets, the third biggest in the world behind the US and Japan, as issuance soars and as central-government bonds start to be included in global benchmarks. But any fund manager venturing beyond these safest assets should consult a map before taking a plunge into provincial government debt.
It is not unusual for local governments to run big deficits in China. The latest official figures show that only the wealthy urban municipalities of Beijing and Shanghai posted a funding surplus in 2017. Revenues collected by the other 29 provincial governments fell short of spending.
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