While Beijing has been "encouraging" private companies to aggressively cut debt in the past year - and nowhere more so than at China's largest real-estate developer, Evergrande, whose bonds have cratered in recent weeks amid fears the forced deleveraging will push the company and its $300 billion in debt into a death spiral - China's local governments have more than doubled bond sales to roll over maturing debt this year, helping to ease their repayment risk.

As Bloomberg reported back in July, cities and provinces sold about 1.9 trillion yuan ($293 billion) of so-called refinancing bonds in the first six months of the year. That's a sharp increase from about 700 billion yuan sold in the same period of 2020, and 660 billion yuan in 2019.

These "refinancing" bonds are sold to replace maturing securities, reducing pressure on local authorities to pay back the debt.

China's refinancing scramble is just beginning: "The amount of debt due will keep growing, so the scale of refinancing isn't likely to fall," said Ding Shuang, chief economist for Greater China and North Asia at Standard Chartered Plc in Hong Kong. "That's the case unless policy makers seriously look to reduce the absolute value of the debt, which is unlikely."

Meanwhile, local governments have slowed the pace of special bond sales used to finance spending on infrastructure like highways and houses, in part due to a lack of quality projects and Beijing's stronger focus on debt control. Infrastructure investment contracted in May from a year earlier, and probably continued to decline in June and July due to a higher base from a year ago, according to economists at China International Capital Corp. They see investment growth rebounding after that to reach about 3.5% for the full year.