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CHINA:  Proposals for Refinancing of Local Government Debt.

CHINA
EM BulletAPACChinaEmerging Market NewsBulletGlobalFixed Income BulletsForeign Exchange BulletsRegionMarkets

•    National People’s Congress Standing Committee discussed on Monday an option to increase the debt ceiling for local governments to allow ‘hidden’ off balance sheet debts to be refinanced on balance sheet (per BBG). 
•    The International Monetary Fund estimates there is approximately CNY60tn (US$8.5tn) of hidden debt from local authorities. 
•    Finance minister Lan Fo’an announced last month that China would soon launch its largest ever program to address the local debt issue.  
•    Suggestions are that anywhere from CNY6tn to CNY10tn of new issuance may be approved this week by the National Party Congress.
•    There are suggestions that this alleviates the financial burden for local governments, but that appears to miss the point. 
•    Bringing off balance sheet debt on balance sheet will raise the official debt levels and challenge the debt ceiling.  
•    Raising the debt ceiling will allow further (on balance sheet) issuance which will help alleviate the fiscal pressure created by the slowdown in the property market. This may still be seen as positive for short to medium term economic momentum. 
•    As well, the NPC is expected to provide further details on what financial resources are available for further stimulus, and where it will be targeted.  
•    As is normal with the NPC, it will be light on in detail as that follows thereafter. 

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•    National People’s Congress Standing Committee discussed on Monday an option to increase the debt ceiling for local governments to allow ‘hidden’ off balance sheet debts to be refinanced on balance sheet (per BBG). 
•    The International Monetary Fund estimates there is approximately CNY60tn (US$8.5tn) of hidden debt from local authorities. 
•    Finance minister Lan Fo’an announced last month that China would soon launch its largest ever program to address the local debt issue.  
•    Suggestions are that anywhere from CNY6tn to CNY10tn of new issuance may be approved this week by the National Party Congress.
•    There are suggestions that this alleviates the financial burden for local governments, but that appears to miss the point. 
•    Bringing off balance sheet debt on balance sheet will raise the official debt levels and challenge the debt ceiling.  
•    Raising the debt ceiling will allow further (on balance sheet) issuance which will help alleviate the fiscal pressure created by the slowdown in the property market. This may still be seen as positive for short to medium term economic momentum. 
•    As well, the NPC is expected to provide further details on what financial resources are available for further stimulus, and where it will be targeted.  
•    As is normal with the NPC, it will be light on in detail as that follows thereafter.