Depth: Special Study on Local Government Debt (with data on debt burden of 31 provinces and cities)
Local Government Debt Special Study-Attached to the debt burden data of 31 provinces and cities and 382 regions. Author 丨 Ren Tao Sources 丨 Bzzk-research (ID: Bzzk-research) under the pressure of economic downturn, local government’s responsibilities reduced,The role of government debt during the period has become increasingly important.
1. Regarding the historical retrospection of local government debt, the summary of important policy information and the latest policy developments (1) The historical retrospection of everything has its cause, and when it comes to the gradual issue of local government debt, it must also be traced back a long time.
1. In the 1990s, the central government ‘s fiscal constraints were severe, accounting for a very small proportion of national budget revenue (less than a quarter). It is in this context that the state introduced tax-sharing reforms in 1994 (such asIn the provincial and sub-provincial tax bureaus, the State Taxation Bureau and the Local Taxation Bureau have been set up) to achieve the goal of increasing financial power and keeping the power of affairs unchanged, and local governments have been facing increasingly serious financial problems since then.One year, the “Budget Law” was formulated and implemented, that is, to supplement local government deficits and raise debt to finance.
2. In the 1990s, especially after the Asian financial crisis of 1997-1998, local governments were under increasing pressure for infrastructure construction, but due to their limited financing channels (cannot borrow from banks or issue bonds, etc.),It is also restricted by the policy of “allowing deficits”, and local governments are prevented from breaking through the financial difficulties.
In this context, commercial banks (especially major commercial banks) suggest that local governments set up financing platform companies to undertake commercial bank credit.
Local governments have also established financing platform companies through 武汉夜网论坛 land asset transfers and other methods. Since then, financing platform companies have played an increasingly important role in local government debt financing.
3. After the financial crisis in 2008, the supplement of local government financing platforms became more prominent.
In particular, the No. 92 (“Guiding Opinions on Further Strengthening the Adjustment of Credit Structure to Promote the Stable and Rapid Development of the National Economy” issued by the People’s Bank of China and the China Banking Regulatory Commission, encourage local governments to increase local financial discounts, improve credit compensation mechanisms, and establishGovernment financing platforms and other methods support local governments with conditions to set up financing platforms and issue financing instruments such as corporate bonds and medium-term notes.
In October of the same year, the Ministry of Finance also issued Circular 631, which clarified that supporting funds for local governments can be raised through market mechanisms using government financing platforms.
4. Under the above-mentioned trend of thought, the number of local financing platform companies has grown rapidly and currently exceeds 10,000.
Since 2009, local financing platform companies have started to borrow on a large scale, and financing methods have not continued to use bank loans. They also include the full use of corporate bonds, project income bonds, short-term financing bonds, medium-term notes, special debt, policy bank loans, and special construction.Funds, bank credit, non-standard, Internet finance, P2P, etc., so the scale of local government debt is getting higher and higher, and the problem is getting worse.
5. Regarding this, the regulatory authorities have started to control and control local government financing platforms since 2010, including Guofa Circular 19 (“Notice on Strengthening the Management of Local Government Financing Platform Companies”), Banking Regulatory Circular 10 (“Guidance on Strengthening the Loan Risk Supervision of Local Government Financing Platforms in 2013) and so on.
In fact, the issuance mechanism of local government bonds is also constantly being adjusted, from generational repayment to spontaneous repayment, to the current spontaneous repayment.
6. In 2014, the central government started debt screening for local governments. In September of the same year, the State Council issued Document 43 (“Opinions on Strengthening the Management of Local Government Debts”), which clearly separated government and corporate debt and began to nationwide.Scope to rectify local government debt issues.
7. The new budget law of 2015 makes it clear that local governments issuing local debt through provincial governments are the only legal government financing channels.
However, in this context, local governments began to use PPP or funds to borrow in disguise.
Various hidden alternatives other than local government debt have sprung up (such as issuing letters of commitment, financial leasing, changing government purchase service agreements, etc.), and the local government’s illegal borrowing activities have again reached a climax.
8. During 2014-2015, the Development and Reform Commission and the Ministry of Finance successively launched special bonds. In 2015, the local government bond replacement work was gradually started.
So far, the scale of special bonds has reached nearly 10 trillion yuan, and the scale of replacement bonds has also exceeded 14 trillion yuan.
9. In 2017, in the context of providing horizontal reform, non-standard financing was faced with very strict supervision, and PPP and local construction funds began to face a full inventory. It is also in this context that the growth rate of investment in infrastructure construction began to decline significantly.From the previous 15% to below 5%, the overly stringent regulatory policies and local government debt are facing problems that cannot be continued, and the policy began to consider adjusting some of the previous policies.
10. Under the pressure of economic downturn, the function of infrastructure support has become prominent again, and subject to the impact of previous financial deleveraging, some local government financing platforms face the risk of capital chain breakage. Under this risk, the State Council and the China Banking Regulatory Commission successively releasedDocuments 101 and 76 clearly stated that financial institutions must meet the reasonable financing needs of financing platforms, and history has entered a new cycle.
(2) Summary of important policy information As far as China is concerned, policies related to local government debt have almost never ceased, and have always been lingering in the market.
Due to the scale of relevant policy documents, only some of the more important policy information is summarized here.
(3) Latest policy developments: Financing platforms have regained their lives, CDB intervenes in local government debt resolution work. There are roughly three latest policy developments on local government debt. We summarize them as follows: 1. 2018 State Council No. 101 and Banking Regulatory Commission No. 76No., explicitly requires financial institutions to meet the reasonable financing needs of financing platform companies, and must not blindly draw down loans, cut off loans, or suspend loans. To avoid necessary supply of projects under construction, the supply of funds should be avoided, and the project should run out of business.
2. The 2019 government work report clearly stated that this year it is planned to arrange special bonds for local governments2.
15 trillion yuan, an increase of 800 billion yuan from last year, providing funding support for key project construction, and also creating conditions for better prevention and resolution of local government debt risks.
Reasonably expand the use of special bonds.
Continue to issue a certain number of local government replacement bonds to reduce the local interest burden.
Encourage a market-oriented approach to properly resolve the debt maturity of financing platforms, and do not engage in “half-later” projects.
3. Since 2019, Zhenjiang, Jiangsu, and Xiangtan, Hunan, and other places have been dating China Development Bank to resolve local government debts by replacing debts that expired with long-term loans.
4. The press conference of the two parties ‘finance ministries in 2019. The relevant leaders of the finance ministries stated that they will cancel the supplementary hidden debts and establish a new financing platform company, and adhere to the principle of no central rescue.
First, monitor local finance, including financing platform companies, and take accountability as soon as the situation is discovered.
Second, cancel illegal financing activities and raise debt in disguise in the name of government investment, government and social capital cooperation, and government purchase of services.
Third, financial institutions must not provide financing for projects that do not have a stable operating cash flow as a source of repayment or have no legal compliance resistance to pledged property.
Fourth, adhere to the principle of non-rescue by the central government, insist on who raises debts and who is responsible, so that “who has children and who holds it”, continue to rectify illegal guarantees, and correct irregularities in government investment funds, PPP, and government procurement services.
Fifth, the newly established financing platform companies will be cancelled, the market-oriented transformation of financing platform companies will be promoted by classification, and the government financing program of financing platform companies will be transferred, and local governments will be resolutely stopped from turning public welfare institutions into financing platforms.
It can be trimmed. Under the downward pressure of the economy, the role of local governments is more important. The reasonable financing needs of government financing platforms require the support of financial institutions, but the concept of breaking the rigid payment has not changed. Financial institutions must continue to adhere to the principle of focusing on the first.The idea of promoting the transformation of financing platforms is still ongoing.
Second, the main categories of local government debt classification To resolve the debt of local government debt should be more clearly classified, we try to classify from the following dimensions: (a) according to the form of expression, divided into major local government debtAnd hidden debt We try to classify local government debt by popular methods, that is, the so-called explicit debt is the direct local government has direct repayment responsibility or guarantee responsibility, and the rest replaces hidden debt.In fact, in classifying debt, World Bank senior economist Hana Palacova Rrixi published articles on “contingent debt” in 1998, 1999, 2000 and 2002,The financial risk matrix is divided into four categories: direct explicit, direct implicit, or explicit and implicit. These two classifications have also been reflected in the gradual category policy.In the file.
In practice, the hidden debt channels are diverse, including local governments through financing platforms, purchasing services, PPP, various development funds and guidance funds, characteristic towns, financing leases, gold exchanges, etc., and the source of funds also includes financial institutionsOn-balance-sheet loans, off-balance-sheet loans, factoring, bills, guarantees, gold exchanges, asset management plans, etc., and more often involve unlawful methods such as real debt, quotation agreements, and commitments to buy back.
The “local government hidden debt” was first mentioned in the July 2017 Central Political Bureau meeting. In the subsequent policy documents, the controlled local government debt also mostly refers to hidden debt.
On April 18, 2018, the National Audit Office issued the “Announcement on the Results of Auditing the Tracking of the Implementation of Major National Policies and Measures in the Fourth Quarter of 2017”, saying that it was issued by six cities and counties in five provinces through violations of regulations.In lieu of borrowing in disguise, such as substituting engineering government purchase service agreements, and forming hidden government debt 154.
This is the first time that a specific number of government hidden debts has been released by a national auditing agency, but it is only the tip of the iceberg that reveals the large scale government hidden debts.
The hidden debts are mainly concentrated at the city and county levels, mainly because these local governments cannot finance by issuing local debts, so they can only raise funds through urban investment bonds and hidden debts.
The China Financial Stability Report (2018) also confirms our indicator.
(2) According to the sources of debt repayment funds, significant debts can be increased and further divided into general bonds and special bonds. According to 2014 No. 43 (that is, the “Opinions on Strengthening the Management of Local Government Debts”), local government debt is divided into generalDebts and special debts, of which the size of general debts and special debts are replaced by restricted management and full-caliber budget management, determined by the State Council and reported to the NPC Standing Committee for approval, and subregional reductions are approved by the Ministry of Finance at the first standing committee of the NPCThe scale of local government debt is measured and reported to the State Council for approval based on factors such as debt risks and financial conditions in various regions.
The so-called local government special bonds refer specifically to bonds issued by local governments according to specific projects and using government funds or special income corresponding to the projects as the source of principal and interest repayment.
The difference between general bonds and special bonds is that local government general bonds mainly use general public budget revenue as the source of principal and interest payments, while local government special bond bonds are mainly government funds for specific projects or special income as the source of principal and interest payments.
Along with this, general debt revenue and expenditure require general public budget management, and special debt revenue and expenditure require government fund budget management.
At this stage, the size of general bonds has reached nearly 11 trillion yuan, with maturities of 1 year, 3 years, 5 years, 7 years, 10 years, 15 years, and 20 years.
The special bonds have maturities of 1 year, 2 years, 3 years, 5 years, 7 years, 10 years, 15 years, and 20 years, and their scale has reached nearly 10 trillion yuan.
At present, there are mainly three types of special bonds: ordinary special bonds, special bonds issued by the Ministry of Finance beginning in 2014, and special bonds issued by the Development and Reform Commission from 2015.
Among them, the local government special bonds of the Ministry of Finance include the existing land reserve special bonds, toll highway special bonds, rail transit special bonds, shantytown reconstruction special bonds, education project special bonds, public college special bonds, scale allocation engineering special bonds, and ruralThere are 8 major categories, including the revitalization of special bonds, with a total of 669 bonds, and the scale has also reached 1.
About 7 trillion.
The special bonds of the Development and Reform Commission currently include special bonds for the elderly industry, special bonds for strategic emerging industries, special bonds for the construction of urban parking lots, special bonds for the construction of urban underground comprehensive corridors, special bonds for the construction and transformation of distribution networks, and special bonds for incubation and incubation.A total of 281 bonds with a scale of 300.1 billion yuan.
(3) Explicit debt is further divided into supplementary bonds and substitute bonds according to the purpose of the raised funds. If divided according to the purpose of the raised funds, the explicit debts of local governments can also be divided into supplementary bonds and substitute bonds. The supplementary bonds are mainly used forFor new project investment, replacement bonds are mainly used to replace the existing debt, and the replacement special bonds are even further divided into directional replacement and non-directional replacement, the so-called refinancing special debt (in popular terms, borrowing new and old).
The replacement of local bonds was officially launched in early 2015, and the size of the replacement bonds was issued that year3.
2 trillion, after nearly 4 years of development, the size of the replacement bonds has now exceeded 14 trillion.
In particular, on May 12, 2015, the Ministry of Finance, Expansion, and the CBRC jointly issued a document (“Notice on Matters Concerning the Issuance of Local Government Bonds by Using Targeted Underwriting in 2015”), clarifying the replacement of stocks issued by the local government in 2015 by the Ministry of Finance.The bond restrictions internally used local underwriting to issue a certain amount of local debt. On May 18, Jiangsu Province took the lead in issuing 52.2 billion local bonds (30.8 billion for replacement bonds), which officially opened the prelude to local government replacement bonds.
Third, the issue of local government special bonds: the issue of a large-scale increase in the issue of special bonds can also replace the function of existing debt, to a certain extent and the targeted downgrade in monetary policy to replace similar functions.
(1) The summary of relevant policy documents issued by the State Council in 2014 issued Document No. 43, which proposed that local governments use government bonds to raise debt. The development of non-profit public welfare undertakings should be financed by the issuance of general bonds by the local government.Financing.
Eight policy documents have so far regulated the special bonds for local governments, and successively introduced eight types of special income bonds for projects.
(II) Main motivations and shortcomings of special bonds for local governments1. Main motivations: Make local government debts significantly and market-oriented, and standardize local government debt financing mechanisms. We believe that there are the following main motivations and reasons: First, comparisonThe official statement is conducive to alleviating local fiscal tensions, strengthening government investment and financing capabilities through special government bonds, and enhancing local governments’ ability to promote economic growth.
In particular, the special bonds for project income can enable local governments to achieve the purpose of special funds while borrowing, which is conducive to standardizing local government financing mechanisms and making it easier to monitor local government debt and risk levels.
Second, in order to make local government debt significantly and market-oriented, strengthen local government debt management.
It is now clear that the scale of the policy encourages local government bonds as a significant financing method, while the hidden debts are strictly controlled, and the policy constraints on local government financing platforms also show obvious importance.
Third, local government special bonds are at least significant debts and still belong to interest rate debts. Investors ‘interest income can be exempted from income and replacement, and their issuance costs are usually replaced by local governments’ traditional financing methods, plus policies.The existence of sexual interest margin space has led to a significant increase in the investment value of local government special bonds and a serious decline in issuance.
Fourth, although the special bonds of local governments are for special purposes and self-balancing of financing projects, they are actually the function of the government, especially for project income claims, which are not profitable during the conversion stage. Generally,Local government special bonds only solve a certain percentage of the funding sources (for example, the second single rail transit special bond issue of 1.8 billion is only 60% of the funding of Wuhan Metro Group).
2. The main disadvantage: The degree of marketization is not enough. Because special bonds can correspond to specific projects one by one, there will be corresponding assets, income, cash flow and other information, so the pricing will be fairer.
Although policies and regulations have been preliminarily guided, special debt and general debt have continued to improve, and the specific projects of special debt have been mixed.
Second, investors are not rich enough, and liquidity is lacking, that is, the secondary market has not really developed, nor has it been able to give full play to the incentives and constraints of market mechanisms such as credit ratings, information disclosure, and market-based pricing.Special investment relies more on the support of so-called policy spreads.
At the same time, in addition to the above two shortcomings, the local government special bonds still have unclear positioning (such as the issuance of special bonds that takes the provincial government as the main body and cannot distinguish the credit status of the provincial and other city and county main bodies).
Taking into account that the main investment entities are mainly commercial banks, it means equivalent to providing financing to local governments through bank credit in disguise. If the subsequent risks are released, they will be further transferred to commercial banks, putting commercial banks under certain pressure.
However, no matter what the local government’s special bonds currently lack, we should still see that the local government’s subsequent financing through special bonds is the trend. After all, for the government, this is the most transparent and explicit financing method.
Although it was just created in 2015, the subsequent annual issuance quotas have almost all increased by leaps and bounds, and the four-year issuance quotas in 2015-2019 are 0.
10 trillion yuan, 0.
40 trillion, 0.80 trillion yuan, 1.
35 trillion and 2.
The $ 15 trillion fracture shows the high-level recognition of local government bonds.
Especially in the context of the continuous economic downturn and the extremely complicated surrounding environment, special government bond preparations are expected.
Fourth, local government financing platforms: At this stage, to meet reasonable financing needs, there are a total of 11,567 local government financing platform companies. Local financing platforms have been responsible for replacing local government financing for a long period of time.Can obtain loans from banks, non-standard financing from financial institutions, etc., and the main body of the local government financing platform is also located at the provincial, prefecture-level, county-level or below.
(1) A total of 1,002 companies were classified and found, and only 2264 companies were found to be provincial credits (including provincial capitals and single-ranked cities), accounting for less than 1/5.
There are 6,175 credits at the prefecture level, accounting for about 56%, and more than 20% at the county level.
(2) Zhejiang Province ranked first with 1,490 local financing platforms, Sichuan Province ranked second only to 780, Jiangsu Province ranked third and fourth and 710 Guangdong Province respectively.
(3) It should be said that the local government financing platform of more than $ 1 trillion at this stage is a bit like the facts of the trust industry in the past, and will inevitably face relatively severe rectification. With reference to trust companies and local financial asset management companies, through mergers and reorganizations, etc.Ways to reduce the number of financing platforms in various provinces and cities and so on.
(4) As the financing platform is also an existing enterprise to a certain extent, the financing platform is promoted through third-party guarantees and mortgages, “debt-loan portfolios”, the establishment of financing guarantee funds, and other means to increase debt financing and date social capital through the PPP model.Providing funds for financing platforms is also the main way to promote the transformation of financing platforms.
V. Explanation of local government debt burden (1) The amount of bonds to be redeemed in 31 provinces, cities, and regions in the next three years: Partial local debt repayment pressure to resist We counted the government bonds and cities that need to be redeemed in 31 provinces and cities during the period of 2019-2021.The amount of bonds invested (excluding other hidden debts), and the ratio of corresponding fiscal revenue.
From the national average level, the amount of bonds repayable in 2019 accounts for the ratio of public financial revenue, and the ratio of bonds repayable in public funds in 2019-2021 and the ratio of public financial revenue to GDP are 28.
06% and 12.
Among them, the amount of bonds (including local government bonds and urban investment bonds) to be repaid by 31 provinces and cities in the country in 2019, 2020 and 2021 will be 3 respectively.
18 trillion, 3.
45 trillion and 4.
Considering that implicit debt is not divided here, the actual pressure may be much greater.
1. The provinces and municipalities with a debt repayment ratio of more than 40% of public financial revenue in 2019 are Hunan (62.
58%), Jiangsu (59.
12%), Shaanxi (58.
45%), Yunnan (54.
97%), Qinghai (52.
13%), Chongqing (51.
55%), Guizhou (46.
27%), Guangxi (44.
39%), Tianjin (43.
28%), Sichuan (40.
21%) Wait for ten.
2. In the next three years, Guizhou (249.
13%), Hunan (202.
39%), Yunnan (197%), Qinghai (187.
47%), Chongqing (185.
10%), Jiangsu (177.
81%), Shaanxi (160.
19%), Guangxi (159.
52%), Tianjin (153.
27%), Sichuan (146.19%), Gansu (134.
41%), Inner Mongolia (132.
42%), Hubei (128.
56%) and so on.
3. The provinces and municipalities whose public fiscal revenue accounts for more than 10% of their GDP are mainly Jiangsu, Hunan, Shaanxi, Hubei, Henan, Hebei, Fujian, Guangxi and Qinghai.
4. At present, the overall significant debt scale is close to 27 trillion yuan, and even according to 1: 1, the hidden scale of local government debt is also nearly 30 trillion yuan. Therefore, it should not be a problem for the local government debt scale to exceed 50 trillion yuan.But considering that 90 trillion yuan in GDP is currently only 11 trillion yuan in public financial revenue, the debt burden rate of local governments can be imagined.
(II) Current stock bond balances and fiscal revenue in 382 regions: debts can only be repaid by borrowing new or replaced ones. Although fiscal revenue in many regions can cover bond fund expenditures in the next three years,Looking at the ratio of bond balance to its fiscal revenue, the pressure is very obvious.
Because only the provinces, provincial capitals, and planned cities have the qualifications to issue local government bonds, most of the financing in the other regions can only be issued through the urban investment platform. This also results in a large proportion of bond balances in fiscal revenue in many regions at this stage.Most can only be repaid by borrowing new or replacing them.
Therefore, from this perspective, it is necessary to keep financing costs low to solve the problem of local government debt.
As of now, there are 117 provinces, municipalities, and regions with outstanding bond balances that exceed their fiscal revenue, and 14 regions have outstanding bond balances that exceed 10 times their fiscal revenue.