MNI China Press Digest, May 22: Debt, Bond, Fiscal Spending

     BEIJING (MNI) - The following lists highlights from the Chinese press for

Tuesday:

     China's central government has a unified understanding on local

governments' implicit debts, and what those implicit debts include will likely

be clarified, reported 21st Century Business Herald. As local governments better

understand the content of implicit debts, these implicit debts will be settled

by the one who raised them, the report said, citing anonymous sources close to

local governments. There is no clear definition of implicit debts at present,

causing difficulty in managing and dealing with local government debts, the

report said, citing an anonymous official from a Provincial Bureau of Finance.

     Recent rising bond defaults and increasing difficulties in bond issuances

are a reflection of the ongoing deleveraging campaign, but they also indicate

that bond investors' expectations have worsened, reported Securities Times. The

financial deleveraging campaign has tightened funding channels, mainly affecting

private corporates who had previously raised too much debt and expanded

aggressively, the report said. Regulators need to closely follow the liquidity

condition and market expectations to let some companies default, and to prevent

regional risks from expanding to systemic financial risks, the report said.

     Analysts expect fiscal spending to accelerate in the next two months after

the central government has encouraged fiscal spending, China Securities Journal

reported. Faster fiscal spending will increase the efficiency of fiscal spending

and will help to cushion the impact of tighter funding on the economy, the

report said, citing Pan Xiangdong, the chief economist at New Times Securities.

However, faster fiscal spending will not bring in more money for local

governments, so a faster fiscal spending in the first half of the year will mean

a slowdown in financial spending in the second half, said Pan. As the

deleveraging and financial risks prevention campaign is still ongoing, fiscal

spending will likely support energy saving, environment protection and rural

vitalization, and not necessarily infrastructure investments, said the report,

citing Zhao Wei, analyst at Changjiang Securities.

--MNI Beijing Bureau; +86 10 85325998; email: he.wei@marketnews.com

--MNI Beijing Bureau; +86-10-8532-5998; email: beijing@marketnews.com

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