[Early Edition] Local Debt Pressures Remain Unabated: Why Are Bank Debt Conversions and Incremental Financing Falling Short of Expectations? (AI Translation)
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- In the first year after the COVID-19 pandemic, China has been focusing on stabilizing growth and preventing risks, with ongoing efforts to address local government debt issues. The Central Political Bureau proposed a comprehensive debt resolution plan in July 2023, which has seen varied progress across regions.
- Financial institutions are cautious about taking over existing financial debts from financing platforms due to stringent requirements for project cash flow and underlying assets. While some regions have made progress with special refinancing bonds replacing hidden debts, overall financial debt resolution is slow, with few cases reported nationwide.
- Local governments and financing platforms were surprised by the swift implementation of policies controlling new platform debts. Since October, new loans and bond issuances have tightened significantly. This has led to increased default pressure as traditional revenue sources like land sales decline sharply, raising concerns about whether this will lead to more covert financing or further economic tightening.
文｜财新周刊 程思炜 王娟娟 张宇哲 丁锋
By Caixin Weekly's Cheng Siwei, Wang Juanjuan, Zhang Yuzhe, Ding Feng
疫后首年，稳增长和防风险并举，地方化债持续推进中。2023年7月中央政治局会议首次提出“制定实施一揽子化债方案”五个月后，各类化债措施进展不一，各地苦乐不均。
In the first year after the pandemic, efforts to stabilize growth and prevent risks are being carried out simultaneously, with the ongoing process of local debt restructuring. Five months after the July 2023 meeting of the Central Political Bureau first proposed "formulating and implementing a comprehensive debt restructuring plan," progress on various debt restructuring measures has been uneven across different regions, with mixed fortunes.
在化解存量地方债务风险方面，财政部门牵头的特殊再融资债券置换落地较快，自7月组织各地申报试点，到10月初启动发行，最早掀起一轮城投债券市场高涨的情绪，一些此前发债受阻的“网红”地区城投债遭疯抢，天津城投债认购倍数一度超过100倍。
In addressing the risks associated with outstanding local government debt, the Ministry of Finance-led special refinancing bond swap has been implemented swiftly. Since organizing pilot applications from various regions in July, issuance began in early October. This initiative sparked a surge of enthusiasm in the urban investment bond market, with bonds from previously popular but issuance-challenged regions being fervently sought after. At one point, subscription rates for Tianjin's urban investment bonds exceeded 100 times.
按2023年9月底国务院办公厅向部分金融机构下发的《关于金融支持融资平台债务风险化解的指导意见》（下称“35号文”），作为城投最重要债权人之一的商业银行入局化债，将通过债务重组和置换等方式，重点承接12个重点省份的存量贷款、非标等高息债务等。这12个省份包括天津、内蒙古、辽宁、吉林、黑龙江、广西、重庆、贵州、云南、甘肃、青海、宁夏。
As of the end of September 2023, according to the "Guidance on Financial Support for Resolving Financing Platform Debt Risks" (referred to as "Document No. 35") issued by the General Office of the State Council to certain financial institutions, commercial banks, as one of the most important creditors of local government financing vehicles (LGFVs), will engage in debt resolution. They will focus on taking over existing loans, non-standard high-interest debts, and others through debt restructuring and swaps in 12 key provinces. These provinces include Tianjin, Inner Mongolia, Liaoning, Jilin, Heilongjiang, Guangxi, Chongqing, Guizhou, Yunnan, Gansu, Qinghai, and Ningxia.
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