Yunnan requires provincial state-owned enterprises to replace debts with an interest rate of more than 6.5percent

category:Finance
 Yunnan requires provincial state-owned enterprises to replace debts with an interest rate of more than 6.5percent


Prior to that, the government of many cities in Jiangsu issued a document demanding the withdrawal of high-cost financing.

In March, Yancheng City, Jiangsu Province, issued a notice on submitting the work plan for debt financing repayment of more than 8% of the cost, which was circulated in the market. A person close to the SASAC of Yancheng City confirmed the authenticity of the document to the reporter. According to the requirements of the speech made by the main leaders of the municipal government at the meeting of the headquarters (expansion) on March 20 to prevent and resolve major financial risks, all municipal enterprises are requested to quickly carry out self inspection and self correction of financing situation, and formulate a work plan for financing clearance of more than 8% of the cost. In principle, the clearance work shall be completed by the end of this year.

On April 2, Jiangsu Taizhou Finance Bureau and state owned assets supervision and Administration Commission issued the notice of the Municipal Finance Bureau and state owned assets supervision and Administration Commission on strengthening the management of capital lending and financing guarantee of state-owned enterprises, pointing out that the annual cost of each new debt of state-owned enterprises at the municipal level shall be controlled within 6% in principle, the annual cost of each new debt of state-owned enterprises at the municipal (District) level shall be controlled within 7% in principle, and the annual cost of each new debt of state-owned enterprises at the municipal (District) level shall be controlled within 7% in principleuff08 The annual cost of each new debt of state-owned enterprises in subordinate parks shall be controlled within 8% in principle .

Similarly, in April, relevant departments of Changzhou City, Jiangsu Province asked for opinions on the control of government debt financing cost, and proposed that more than 7% of high-cost debt should be replaced and cleared within the year of the city level, and more than 8% of high-cost debt should be replaced and cleared within the year of the city under the jurisdiction; and the cost red line of new financing in 2020 should be defined. In addition, in principle, municipal state-owned platform companies shall not use trust and financial leasing to increase financing. When the financing environment is tight, trust and financial leasing can be appropriately adopted as the revolving financing of stock debts except for the succession of implicit debts, but the proportion of new financing shall not exceed 5% of the annual new financing balance; the new financing tools shall be controlled by 15% of the maximum LPR of the same loan market in the same period. If Jiangsu regards 8% interest rate as a threshold of financing replacement, Yunnan will set a lower rate of 6.5%. High cost financing is generally non-standard financing realized through trust, lease, etc. However, due to the loose expectation of currency, the issuing interest rate of urban investment bonds is low, and local governments also hope to reduce the financing interest rate through debt replacement. In addition to reducing the financing cost, many governments also require to promote the credit enhancement of the main body of the citys state-owned platforms, improve the market recognition of state-owned platform companies, support and encourage state-owned platforms to carry out market-based financing according to law, and enhance the direct financing ability. For example, Changzhou requires that the main credit rating of Changzhou transportation industry group be upgraded to AAA, and the main credit rating of Changzhou Jinling investment and construction group be upgraded to AA +. Source: responsible editor of 21st century economic report: Wang Xiaowu_ NF

Similarly, in April, relevant departments of Changzhou City, Jiangsu Province asked for opinions on the control of government debt financing cost, and proposed that more than 7% of high-cost debt should be replaced and cleared within the year of the city level, and more than 8% of high-cost debt should be replaced and cleared within the year of the city under the jurisdiction; and the cost red line of new financing in 2020 should be defined. In addition, in principle, municipal state-owned platform companies shall not use trust and financial leasing to increase financing. When the financing environment is tight, trust and financial leasing can be appropriately adopted as the revolving financing of stock debts except for the succession of implicit debts, but the proportion of new financing shall not exceed 5% of the annual new financing balance; the new financing tools shall be controlled by 15% of the maximum LPR of the same loan market in the same period.

If Jiangsu regards 8% interest rate as a threshold of financing replacement, Yunnan will set a lower rate of 6.5%.

In addition to reducing the financing cost, many governments also require to promote the credit enhancement of the main body of the citys state-owned platforms, improve the market recognition of state-owned platform companies, support and encourage state-owned platforms to carry out market-based financing according to law, and enhance the direct financing ability. For example, Changzhou requires that the main credit rating of Changzhou transportation industry group be upgraded to AAA, and the main credit rating of Changzhou Jinling investment and construction group be upgraded to AA +.