New | China's government debt-bond swap plan expected to draw investors
Large pool of potential buyers and small size of offering rule out role for PBOC, say economists
China's local government debt-for-bond swap programme, with an initial size of 1 trillion yuan (HK$1.25 trillion) this year, might attract a variety of investors without triggering a US-type quantitative easing.
The Ministry of Finance has asked provincial authorities to convert trillions of yuan of expiring debt into bonds that carry lower yields and longer-term maturities. The move is to improve transparency of liabilities and ease short-term repayment pressures for local governments.
Finance Minister Lou Jiwei told the South China Morning Post last week there was no need to get help from the People's Bank of China on the debt replacement plan. The sales of the bonds would be market-oriented, he said.
As Lou's comments basically ruled out widely speculated bond purchases by the central bank, there are questions on who might be the potential buyers.
Jurgen Conrad, the head of the Economic Unit at the Asian Development Bank in China, told the Post the pool of potential investors would be large, including domestic commercial banks, other institutional investors, and possibly also foreign buyers.
State-owned policy banks, which have heavily financed infrastructure projects, might be interested too, Conrad said.