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published in(发表于) 2014/12/10 8:25:06
About 2.8 trillion municipal debt due next year， district and county level risks

-Journalist Zhao Jing in Beijing reported

Press on December 8, from "Moody's 2015 credit seminar" was informed that Moody's is expected in 2015, China will have about 2.8 trillion debts of local governments. Industry sources said, at present in order to solve the debt problem, it is imperative to resolve the huge stock of debt, the 2014 debt interest payments accounted for more than 50% of new Community funding, seriously affecting the quality of economic operation and the transmission mechanism of monetary policy.

"Memory problems more serious than delta. Since 2009, our country has entered a vicious cycle of debt, leverage of local government including the business sector promotions, projects are difficult to produce the desired return on investment, did not generate enough cash flow to cover investments. "The Institute's Chief fixed-income analyst at Societe Generale securities said high mountains:" new old only by more borrowing to roll over debts. Our calculations, the 2014 debt interest payments in new Community funding of around 53% per cent of the total. Half of the Community financing increase to be used for interest payments. ”

Worthy of attention is, in memory of local government debt risk also differ in size.

Because of land transfer income averaged 50% per cent of local government revenue, if housing prices soared in the early, large areas of land as collateral to credit market as a whole, and then if you have greater downward pressure on prices, the local financial revenue will face greater pressure.

As far as city investment bond, city investment bond is relatively safe at the provincial and municipal level, district level with great risk. From 2010 to 2013, county level city investment bond increases the highest revenue, access to resources is the worst of all levels of Government. High mountains, said include banks such as Societe Generale said Bank municipal platform is relatively tolerant, willing to provide follow-up credit, but credit support for County platform company in the ever-shrinking.

"From 2012, stimulated by the rate cut, lowering, real estate and local government level through the shadow banking support, debt expansion mode, as bond funds such as price spikes in the market, which at the end of 2013 has come to an end. "High mountains, told reporters:" the banks come out of consideration, is shrinking in real estate, some business at the local government level. This regulation is ineffective, mostly banks because of concerns about its balance sheet, risk considerations, voluntarily contracting business. ”

Moody's local government and public institutions Department Directors General Manager David Rubinoff told Reporter: "caused current debt problem of fundamental factors main has four points, a is place revenue and spending not coordination; II is based facilities needs strong, town of fast advance, while 2009 to 2011 global financial crisis during China implementation economic stimulus plans; three is banned local government directly borrowing; four is local government investment and borrowing of motivation not reasonable. ”

At present, from Central Government to local governments were aware of the seriousness of the debt, the Government hopes that by municipal-bond pure public welfare project, of course, the ratio will be relatively small. More is to clean up after local government financing platforms, through the introduction of the PPP model of social capital for financing, profitability has a certain project was spun off from the platforms of local governments, and the local government from the first investor to become providers of social welfare.

David Rubinoff said, China is expected to carry out more reforms which will help to establish direct lending framework. First, the new findings and the accrual of debt gradually consolidated financial report publicly disclosed; in addition, the Treasury will introduce the provisions incorporated in the budget of local government debt management and tax reform and reform of the system of transfer payments simultaneously; land transfer public disclosure of audit results against the land finance reform; after the new budget law came into effect on January 1, 2015, local governments have begun their own borrowing.

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