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The NDRC Denied Cleaning Up The Local Debt &Nbsp; The Central Bank Warned Against The Risk Of Default.

2011/6/3 17:17:00 69

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NDRC Liquidated Superposition Risk Of Local Debt Default

Recently, a piece of news that China will deal with 2 trillion -3 trillion yuan of risky local government debt in 6-9 months has aroused great concern in the securities market. Yesterday, the banking share fell sharply and dragged down the market.

However, the NDRC denied that the central government had cleared 3 trillion local debt reports.

It is understood that the local government debt audit launched by the National Audit Office in early March of this year has not yet been completed, and the relevant departments will not be finalized when the specific situation of local government debt is not fully grasped.

Cleaning plan

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Audit work has not yet been completed.

On the evening of May 31st, the foreign exchange quoted many sources as saying that China is prepared to clean up 2-3 trillion yuan of local government debts which may default, the practice is to pfer part of the debt into several newly established companies and to dispose of the provincial and municipal government agencies for sale.

bond

Limitations.

One source said that the central government would intervene to repay some of the bad loans, and the banks would bear some losses. At the same time, it would also open private investment cases to private investors.

After the publication of the news, the domestic media have called the CBRC and the NDRC for verification, but all the regulators said they did not know.

The Ministry of Finance told the media that the plan was still in its infancy, and no final conclusion has yet been reached.

The relevant ministries and personages indicated that the plan of the foreign power station was not known, but he thought that before the results of the National Audit Office's audit on the local government debt came out, it would be impractical to talk about the specific liquidation plan.

More than 10000 local financing platforms

The report released by the people's Bank of China has revealed the current development of local financing platforms.

The report cautioned that credit risks still need to be paid attention to because of the large amount and long duration of platform loans.

And related to the market, there are rumors that the relevant departments will rectify the financing platform, and the topic of local debt has suddenly started to rise.

According to the data disclosed by the central bank report, by the end of 2010, there were more than 10 thousand local government financing platforms in the country, which was not a rapid growth compared with more than 8000 at the end of the CBRC in 2009.

However, if the size of loans is calculated, the growth of platform loans will be quite rapid.

The report revealed that as of the end of last year, platform loans accounted for no more than 30% of the renminbi loans.

At the end of last year, the amount of RMB loans exceeded 45 trillion yuan, and the scale of platform loans was also over 10 trillion yuan, far exceeding the 7 trillion yuan level disclosed two years ago.

What is more concerned is that the report reveals that of the more than 10 thousand financing platforms, 70% of the platforms are scattered among the county governments with the most intense financial resources at all levels.

The local government financing platform is set up by local governments and their departments and agencies through financial appropriation or injection of assets such as land and equity to undertake the financing function of government investment projects, and has the independent legal person qualification.

economic entity

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The risk implied by local government financing platform is essentially credit default risk.

Whether it has the ability to repay debts on time has become the same financial problem faced by some financing platforms in China and some governments in the current European debt crisis.

This shows that the central bank's warning is not empty talk, and with all the relevant factors, we should pay special attention to the possibility that the debt default risk of the financing platform will be superimposed and enlarged in the next two years.