China’s credit investors are snapping up bonds issued in its most indebted provinces, encouraged by signs that Beijing will help local governments clean up a mountain of borrowings.

Local government financing vehicles (LGFVs) — investment companies that raise debt on behalf of local governments and build infrastructure projects for them — have been rushing to meet the renewed demand. Their monthly bond sales jumped in August to the second highest on record at Rmb640bn ($88bn), according to calculations by the Financial Times based on Wind data.

Enormous debts accumulated by China’s provinces and cities have become a pressing problem for policymakers, with Beijing recently dispatching experts to scrutinise the books of localities and deal with bloated balance sheets. Debt issued by LGFVs is estimated by the IMF to total Rmb66tn.