FTZ

Among all the newly-issued FTZ bonds this year, 55, or two-thirds of all 82 issuers, were LGFVs, according to Reuters' calculations.

"LGFV issuers are active in the FTZ bond market because they require funding," said Royston Quek, managing director of debt capital markets at Haitong International Securities in Hong Kong.

One recent deal, for example, was Quzhou Industrial Development Group Co, of China's eastern province of Zhejiang, which issued 500 million yuan of 3-year FTZ bonds with a coupon of 4.2%.

"How big the FTZ market could grow depends on how much Chinese banks could allocate their risk limits to FTZ bond issuers and if other investor segments decide to get involved," said Tim Fang, head of Greater China debt capital markets at Credit Agricole CIB.

The joint venture partner is the Lingang FTZ, and the company said it would seek other investors in the firm with registered capital of $5.5 billion.