Analysis – Struggling Chinese local governments find funding loophole, life-saving straw in 'pearl debt'

SHANGHAI/HONG KONG (Reuters) – China’s cash-strapped local governments have suddenly rushed to an unusual corner of Shanghai’s debt market , where vague rules offer a way around restrictions on onshore borrowing.

Some analysts have described local government financing vehicles (LGFVs) as “black holes” in China’s financial system, with debts exceeding $9 trillion, and Still rising. But Beijing is counting on them to keep spending to help revive an incomplete economic recovery. LGFVs selling so-called “pearl bonds” as foreign-issued Shanghai FTZ debt soared to record highs Billion ($ billion) so far this year, official figures show- Nearly double the total of last year.