MNI China Press Digest Jan 8: LGFV Bonds, Rental Housing, SOEs

Highlights from Chinese press reports on Monday:

• Local government financing vehicles' appetite for high-interest, short-term offshore debt issuance could attract the attention of regulatory authorities in future as the deals sidestep rules that aim to limit local debt and lower costs for local governments, Yicai.com reported citing Wang Lei, head of industrial and commercial enterprise rating at S&P Global Ratings. LGFVs are keen to issue foreign bonds maturing in 364 days to escape the regulatory scope, which only targets one-year foreign debt instruments. A total of 234 LGFV bonds were issued overseas throughout 2023, raising USD25.37 billion, of which more than two-thirds have maturities of less than one year. The average financing interest rate of these short-term bonds is 6.5%.
• The People’s Bank of China said it will support commercial banks to issue rental housing development loans to real-estate companies, industrial parks, enterprises and institutions to build and renovate long-term rental housing, according to a statement on its website. It will also encourage banks to issue loans for group purchases of unused houses for long-term holdings and operations as affordable or rental housing. This latest guideline aims to solve the living problems of new citizens and young people mainly in big cities, and will take effect from Feb 5.
• The State Council will improve the income handover mechanism of state-owned enterprises and expand the scope of income turned over, Yicai.com reported following the latest government guideline. Some SOEs were previously not included. In 2020, the central government required the proportion of SOE funds transferred to the public budget to increase to 30%, mainly to safeguard and improve people’s livelihood. The national state-owned capital operation budget revenue was about CNY568.9 billion in 2022, while the expected revenue in 2023 is about CNY535.8 billion.