Limited Debt-paying Capacity Local Government Bond Issuance Scale Decreased for Two Years

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 Limited Debt-paying Capacity Local Government Bond Issuance Scale Decreased for Two Years


Local government bond issuance has declined for two years. Limited debt repayment capacity is one of the reasons.

By contrast, the debt ratio of our government in 2018 increased by 0.8 percentage points compared with the previous year.

On January 23, the Ministry of Finance released data showing that in 2018, 4165.2 billion yuan of local government bonds were issued nationwide. Among them, 2219.2 billion yuan of general bonds and 1946 billion yuan of special bonds were issued. Compared with the relevant data in 2017, the total amount of local government bonds issued in China fell by 192.9 billion yuan last year, of which the general bonds fell by 142.7 billion yuan and the special bonds by 50.2 billion yuan.

Wang Kebing, deputy director of the Budget Department of the Ministry of Finance, had previously said that in 2017, local government bonds issued by local governments nationwide amounted to 4.36 trillion yuan, a decrease of 1.69 trillion yuan compared with 2016. So far, the scale of local government bond issuance has declined for two consecutive years. It is reported that the reason for the decline in 2017 is due to the reduction in the size of replacement bonds. In 2018, the number of replacement bonds also decreased. Data show that the number of replacement bonds and refinancing bonds issued nationwide last year was 19.94 billion yuan, while in 2017, the size of replacement bonds was 2768.3 billion yuan.

Ding Jianchen, a professor at the University of Foreign Economic and Trade, explained to reporters of the Beijing News: Controlling local government debt is a key and difficult issue in current macroeconomic management. Why is the scale of local government bonds declining? There are three reasons: first, take the initiative to control the scale and prevent risks; secondly, the cost of debt repayment of local governments is increasing, and the ability of debt repayment is limited; thirdly, the absorptive capacity of the entire financial market is limited, that is to say, the issuance of debt can not go out.

In addition, Hao Lei, deputy director of the Budget Department of the Ministry of Finance, said at a press conference on fiscal revenue and expenditure in 2018 that by the end of 2018, the debt balance of local governments in China was 18.39 trillion yuan. If the debt ratio (debt balance/comprehensive financial resources) was used to measure the debt level of local governments, the debt rate of local governments in 2018 was 76.6%, which was lower than the international standard of 100-120% alert line. u3002 In addition to the central government debt balance of 14.96 trillion yuan, according to the preliminary GDP accounting figures published by the National Bureau of Statistics, the debt ratio of government debt (debt balance/GDP) is 37%, which is lower than the warning line of 60% in the EU, and also lower than the level of major market economy countries and emerging market countries.

However, the Beijing News reporter noted that on March 7, 2018, Xiao Jie, then Minister of Finance, said, By the end of 2017, the debt ratio of our government, that is, the ratio of debt balance divided by GDP, is 36.2%. By contrast, the debt ratio of our government in 2018 increased by 0.8 percentage points compared with the previous year.

Ding Jianchen said that in the past decade or even 20 years, the debt economy has always been a major feature of Chinas economy, that is, to endorse the governments credit, to borrow money in the whole society, and to absorb funds mainly for investment and construction of livelihood projects. Facing the complicated economic environment at home and abroad, expanding the scale of government debt and reducing taxes and fees on a large scale are the inevitable choices to improve the current economic situation.

At present, Chinas debt ratio is still within a reasonable range. However, we should not only look at the number of debt ratios, but also see whether the projects invested by the funds formed by the debt can really produce benefits and efficiency, which is the key. From the perspective of medium and long-term development trend, the goal of Chinas fiscal reform and transformation is to return to sound finance, abandon the illusion of deficit, reconstruct the economic system, consolidate the foundation of financial resources, and realize the goal of strengthening the country and making the people rich. Ding Jianchen said.

National fiscal revenue increased by 6.2% year-on-year. The balance of local debt was 18386.2 billion yuan.

According to data released by the Ministry of Finance on the 23rd, the revenue and expenditure of the fiscal revenue and expenditure in the whole year of 2018 were in good condition, with the national general public budget revenue reaching 18,335.2 billion yuan, an increase of 6.2% over the same period of last year, and the national general public budget expenditure reached a new high of 2209.6 billion yuan, an increase of 8.7% over the same period