He Wan Man: Trillions Of Replacement Debt Highlights Local Financial Difficulties

China's local government is about to issue 1 trillion replacement debt, becoming the biggest financial news this week. After careful taste, the days of local finance in China are not so good.

According to the audit report of the national debt of the Audit Commission, by the end of June 2013, the local government had three debts, 10 trillion and 900 billion yuan in debt and 2 trillion and 700 billion yuan in debt, and 4 trillion and 300 billion yuan in debt. There are three prerequisites for the issuance of the 1 trillion replacement bonds: one is the first debt, which is the "local government's direct debt repayment obligations"; the two is for the repayment of debts due in 2015 (186 million yuan); the three is for the replacement of bank loans (in 10 trillion and 900 billion of the debts, bank loans accounted for 56.56%). That is to say, if more than 1.8 billion debt expires in 2015, if there is no 1 trillion replacement debt, more than half will probably not be able to repay it on time. The expiry of July 2013 to December and 2014 is larger than that due in 2015, accounting for 22.92% and 21.89% respectively, and only 17.06% in 2015.

Why in 2013-2014 years? Local debt At the peak of the repayment period, when the local government is facing the biggest debt repayment pressure, there is no debt replacement, but now the debt is relatively small. Instead, it is necessary to issue bonds. Although the new budget law will be implemented this year, the local government debt must be disclosed, but it also highlights the local financial life this year. Otherwise, land finance has shrunk dramatically. Statistics released by the Statistics Bureau show that in 1-2 months, the land acquisition area of real estate development enterprises decreased by 31.7% compared with the same period last year. The land transaction price decreased by 30.2% compared with that of the previous year, and only 69 billion 900 million yuan in two months. If it is still at a rate of two months and 70 billion, it will be 4000-5000 billion a year, 3-4 trillion in the past year, and 426 million yuan in 2014. The expenditure of local governments is getting bigger and bigger. Most of the pension problems, education problems, medical problems and so on, which are most concerned by the NPC and CPPCC this year, depend on local financial resources. It appears that the issuance of 1 trillion replacement bonds this year is only the beginning. Next, "replacement bonds" as a new breed of bonds will continue to meet investors.

Of course, on the other hand, the issuance of local government debt replacement. bank loans It is also the voice of banks. The non-performing loan ratio of China's banking industry has been rising for 6 consecutive quarters, of which local government debt is the biggest hidden danger. Why is the valuation of bank shares only 5-6 times? Because of this, trillions of replacement debts have just landed, and bank shares have heard "debt" dancing.

The 1 trillion replacement debt issued by the State Council is actually borrowed from the new and old ones. Borrowing is long, borrowing is low (interest rate) is high (interest), changing loans (indirect financing) is bonds. Direct financing In the final analysis, it is by increasing the leverage ratio of the society and family to reduce the leverage ratio of the government. This has many advantages, such as reducing the government's debt burden and debt cost, lowering the non-performing loan ratio of commercial banks, and so on. But in essence, it is the replacement of short-term debt into long-term debt. Now we call "the three phase superposition", one of which is "the digestion period of the previous policy". Yes, nearly 20 trillion of the local government debt has been accumulated over the past few years. Now, after the debt has been moved back, will we face another "prophase policy digestion period" after a few years?