Wen Zhong Na Xian Is The Pulse Of China'S Economy; &Nbsp; Solving Local Debts.

China's economic growth is no problem, there is no problem in fiscal revenue, and the debt risk problem of the local government financing platform can be completely solved.

The main suggestion is to "slow down" and not to worry.

Premier Wen Jiabao recently convened experts in various fields to talk about the economic situation in Zhongnanhai in order to promulgate the economic policy in the second half of the year.

How to solve the debt risk of local government financing platform is one of the key topics.

In most proposals, the idea of "slow down" takes the lead.

A person attending the forum said.

involve

Reuters reported yesterday that Dr. Zhao Qingming, an expert on macroeconomic research at China Construction Bank (601939, stock bar), yesterday pointed out that the problem of repayment due to the local government financing platform really needs to "slow down" so as not to break the gold chain.

Especially for investment projects of infrastructure projects of the whole year, at present, when there is no cash flow at the moment, it is appropriate to allow the loan to be renewed and allowed to extend.

In the interview, deputy director of the Financial Research Institute of the State Council Development Research Center, Ba Shu song, also put forward the proposal that local government financing platform debts should be "soft landing".

China's Audit Commission announced after a comprehensive review that by the end of 2010, the total balance of local government debt amounted to 10 trillion and 720 billion yuan, of which 6 trillion and 710 billion of liabilities were repaid, 2 trillion and 340 billion of the liabilities covered by the guarantee, 84.42% of the total two items, and 1 trillion and 670 billion of other related debts.

The CBRC was approved "regardless of national conditions".

In the local financing platform debt, loans from banks amounted to 8 trillion and 470 billion yuan, accounting for 79%, while the debt reached 2 trillion and 620 billion and 1 trillion and 840 billion yuan respectively in the current and next two years.

As the CBRC has issued a strict policy to control the new credit policy of the local government financing platform, it can not borrow the new and old, unable to develop the new capital chain, and the market has already come to the conclusion that after the debt maturity of some local government financing platform, it can not repay the principal and interest.

The news triggered a panic of the city government bonds and corporate bonds related to the local government platform, and the market turnover also shrank sharply.

"The CBRC policy completely disregards China's national conditions.

Zhao Qingming said, "municipal projects tend to be a long-term project, but there are very few bank loans that have been repaid for more than 5 years.

Slam the new loan and cut off the funding of these projects.

"Relative to assets, repayment should really be" slow ", otherwise it will create human confusion.

"But the solution must be launched as soon as possible," he said.

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Case obtained

However, two executives from state-owned commercial banks revealed that loans from financing platform projects from Shanghai, Yunnan and Guangxi provinces have been granted special approval by the CBRC and are appropriately extended after the expiration of the debt principal.

"Many financing platforms set up after 2008 are generated for financing purposes. If the stock loans continue to grow, they will die, and the principal will not be able to afford them.

"A credit rating company manager who has reported debts to several cities," said the manager.

He believes that at present, most of the local financing platforms are invested in basic projects. There is a serious mismatch between the short maturity of the debt and the payback period of the long-term investment projects. "Delaying tactics" is not a solution. We must choose to extend the cases or take other measures, otherwise there will be problems.

A manager of the Credit Department of a joint-stock bank said that the CBRC was very likely to extend the case, and no one would like to tear it out.

Now, some local financing platforms will soon become bad if they do not renew loans, because they are eating their food.

Local governments are allowed to issue

Many market participants say that although China's local debt balance is equivalent to 26.9% of gross domestic product (GDP), the government's fiscal revenue and foreign exchange reserves have given the government no default in the past three years, and the most urgent task is to solve the liquidity risk.

Zhao Qingming said that how to solve the problem of "big power and small financial power" has long been a problem for local governments.

Allowing local government financing platforms to issue longer term municipal bonds, and matching the liabilities of local governments with asset maturity, is an effective way out.

"In the long run, we believe that the government will not default, but if the short-term local liquidity risks erupt, it will easily provoke Domino.

Allowing local governments to issue municipal bonds is a train of thought.

"The head of the Credit Department of a state-owned big company said.

Qu Hongbin, chief economist of Greater China in HSBC, also said that it is imperative to start issuing municipal bonds. Any delay may drag banks down, so that the risk of default on banks in the next few years will be doubled.

The Audit Commission also said that it is possible to study the provincial government's moderate borrowing right, and gradually explore and push it to the qualified municipal government. The debt raising plan needs to be examined and approved by the State Council, and the local debt budget should be compiled and incorporated into the local budget management.