Minister of Finance: Forbidding local governments to increase implicit debts in the form of corporate bonds

category:Finance
 Minister of Finance: Forbidding local governments to increase implicit debts in the form of corporate bonds


It is strictly forbidden for local governments to increase hidden debts in the form of enterprise debts

In terms of preventing and resolving hidden debt risks, Liu Kun said that it is necessary to improve the normalization monitoring mechanism and never allow new projects and new stalls to be set up by adding new hidden debts. We should strengthen the budget constraints, comprehensively strengthen the demonstration of project financial affordability and budget evaluation, and incorporate all financial expenditures into budget management according to law. We should strengthen state-owned enterprises and institutions, improve the allocation mechanism of local governments and their departments to enterprises and institutions according to law, and prohibit local governments from increasing hidden debts in the form of enterprise debts.

At present, the growth momentum of hidden debts of local governments has been curbed. From the perspective of the resolution plan announced by the local government, it is mainly resolved by coordinating funds to repay a batch; debt replacement, extending a batch; project operation, digesting a batch; introducing capital, converting a batch.

Liu Kun pointed out that development oriented and policy oriented financial institutions must operate prudently and in compliance with relevant regulations, comprehensively consider the project cash flow, mortgage and other prudent credit, and strictly prohibit illegal financing to local governments or borrowing in disguised form with local governments.

Development financial institutions refer to China Development Bank, while policy financial institutions refer to agricultural development bank and export import bank. In recent years, China Development Bank and agricultural development bank have been widely involved in government credit business. As some businesses are bound with government credit, there is a suspicion of new hidden debt. Under the new situation, the traditional government business is also facing the difficulties of transformation, such as the shed reform loan and special construction fund.

The operation mode of special construction fund is as follows: China Development Bank and agricultural development bank issue special construction bonds to postal savings bank, and then use special construction bonds to raise funds to establish special construction fund. China Development Fund or agricultural development fund will invest in the project company by equity.

In the case of large-scale investment, the fund has invested in some private enterprise projects. However, due to risk considerations, China Development Fund (CDB) and Agricultural Development Fund (IFAD) require local financing platforms to buy back the project equity of private enterprises held by the fund according to the agreement, while private enterprises buy back their equity from local financing platforms. In recent years, some special construction funds are also identified as hidden debts.

In the morning of the 19th plenary session of the Central Committee of the Communist Party of China, the spirit of the National Development Bank was conveyed on October 30. The meeting said that we should focus on the main responsibility and main business, give play to the role of strategic tools and policy tools, reform the internal system and mechanism, improve the governance system, promote the innovation of financing mode, assist the market-oriented reform of investment and financing system in key areas, and better play the role of development finance as a bridge and link between the government and the market, and contribute to promoting the better combination of effective market and promising government.

On November 26, Zhou Qingyu, vice president of China Development Bank, introduced at the 264 regular press conference of banking and insurance industry that during the 14th five year plan period, CDB will provide 2 trillion credit in the field of urban old residential reconstruction, and will make a good connection with the financing planning of various provinces during the 14th five year plan. As for the problem that local governments may face financial constraints, CDB will solve it from three aspects

First, we should firmly rely on local governments. Where the local government has enthusiasm and initiative, CDB will actively cooperate with and serve them. The government should formulate relevant policies, and then integrate the resources owned by the government, such as land, idle factories and communities.

Second, we should give full play to the role of local state-owned enterprises. We should integrate the platforms of local state-owned enterprises at the provincial, prefectural and county levels and use them to undertake this task. On this basis, China Development Bank provides financing support, adheres to the principle of low profit, implements preferential interest rate, and reduces the financial cost of old residential reconstruction.

Third, we should actively promote the introduction of social capital and ensure that social capital has a reasonable return.

The market is also concerned about how to innovate the old financing mode of CDB. Liu Kun also said that local financing platform companies should be cleaned up and standardized, and their government financing functions should be stripped. We will improve the market-oriented and legalized debt default disposal mechanism, and resolutely prevent the accumulation of risks from forming systematic risks. We will strengthen supervision, audit and accountability, and strictly implement the lifelong accountability system for government debt raising and the mechanism of debt backtracking.

Reasonable determination of government debt scale

At a seminar held in July this year, Wang kebing, a first-class inspector of the budget department of the Ministry of finance, said bluntly that with the rapid expansion of the issuance scale of local government bonds, especially special bonds, the local government debt balance has grown rapidly. The local government debt ratio is likely to enter the internationally accepted 100% - 120% warning range by the end of this year, and the government debt risk is gradually increasing.

Liu Kun proposed to match the general debt limit and the local government revenue limit, and to match the general debt limit with the local government revenue. We will improve the debt risk assessment index system of local governments with debt ratio as the main factor, and improve the debt paying ability evaluation mechanism of local governments. Strengthen the application of risk assessment and early warning results, and effectively move forward the risk prevention and control gateway. Due to the steady recovery of macro-economy, the debt ratio of local bonds approaching the warning line, and the idle funds of local bonds, the market expects that the scale of new special bonds will decline next year. In terms of national debt, Liu Kun said that we should optimize the variety structure and term structure of national debt and local bonds. We will continue to promote the healthy development and opening up of the Treasury bond market, improve the yield curve of treasury bonds that reflects the relationship between supply and demand in the market in a timely manner, and give better play to the market pricing benchmark role of the interest rate of government bonds. We will improve the disclosure mechanism of government debt information, and promote the formation of a market-oriented and legal financing self-discipline and restraint mechanism. Source: Chen Hequn, editor in charge of economic report in the 21st century_ NB12679

Liu Kun proposed to match the general debt limit and the local government revenue limit, and to match the general debt limit with the local government revenue. We will improve the debt risk assessment index system of local governments with debt ratio as the main factor, and improve the debt paying ability evaluation mechanism of local governments. Strengthen the application of risk assessment and early warning results, and effectively move forward the risk prevention and control gateway.

Due to the steady recovery of macro-economy, the debt ratio of local bonds approaching the warning line, and the idle funds of local bonds, the market expects that the scale of new special bonds will decline next year.