China moves to ease local government debt burden
Regional authorities can convert up to 1tr yuan worth of high-cost debt into lower-yield bonds
The Ministry of Finance says it has allowed local authorities to convert up to one trillion yuan (HK$1.24 trillion) worth of high-cost debt into lower-yield government bonds in a bid to reduce the debt-service burden facing regional governments.
The move, announced by a finance ministry spokesman, could help trim interest payments by 40 billion to 50 billion yuan a year, a statement posted on the ministry's website said.
Local governments on the mainland are facing challenges including slower growth in fiscal revenues, closer regulatory scrutiny of the risks of their borrowings, tighter bank lending, sliding land sales revenues, and the persistent need to launch new infrastructure projects to stabilise local economic growth and employment.
"The measure will ease spending burden for some local governments while it will also allow them to increase spending in other needed areas," the spokesman said.
The ministry did not provide details of the debt conversions or say which provinces had obtained approval.
Official figures show that local government debt reached 17.9 trillion yuan by the end of June 2013. The rapid increase in local debt amid an economic downturn has sparked default concerns among observers.