Pan Yingli, professor of finance at Shanghai Jiao Tong University, suggests the establishment of a mechanism to enable local governments to issue bonds for trading in Hong Kong.

"Under the mechanism and Hong Kong law, international capitalists and investors can restrain local governments' financial behavior; local governments should push forward transforming their financial decision-making to achieve more transparency and a more scientific and democratic decision-making process," she said.

Xiao Geng, research director and senior researcher at the Jinglun Institute for International Economics, said there will be no solution for local government debts without infrastructure that defines the ownership and settlement of assets and debts before local governments can issue bonds.