Guizhou city cast steady?

2022-06-27 0 By

Today a news caused widespread concern in the market.On January 26, 2022, The State Council issued opinions on Supporting Guizhou to Break new Ground in the Development of Western China in the New Era (Guofa [2022] No.2, hereinafter referred to as No.2 Document). In the section of “Preventing and Resolving Debt Risks”, it was clearly stated that “on the premise of implementing the responsibility of local government debt and not adding new hidden local government debt,Financing platform companies are allowed to negotiate with financial institutions to take appropriate measures such as rollover and debt restructuring to maintain capital turnover for the stock of hidden debts that meet the conditions “.There are a few details that might need to be discussed here.It should be noted that it is not new to allow THE PLATFORM to maintain its capital turnover through renewal and debt restructuring.In fact, as early as October 31, 2018, The General Office of the State Council issued the Guiding Opinions on Maintaining the Strength of Strengthening Weaknesses in the Field of Infrastructure (2018) 101), which clearly stated that “under the premise of not increasing the scale of local government’s hidden debt, the existing hidden debt that is difficult to repay,Financing platform companies are allowed to maintain capital turnover through appropriate rollover and debt restructuring on the basis of consultation with financial institutions “.What we are more concerned about is that the promotion of financing platforms to maintain capital turnover means that financing platforms will continue to exist in the future, but they need to be transformed to materialization and marketization, as well as strategic restructuring and professional integration among financing platforms.Of course, this also means that in the process of transformation, local governments need to load some operational assets, promote the financing platform to generate operating cash flow, and directly have the ability to continue operations and debt paying, but this process will not be too short.Generally, allowing rollover and restructuring means that a financial institution can swap its hidden debt in a way that is not cost-free for the creditor.It usually means longer maturity, lower interest rate (such as interest rate down to about the benchmark), weakening of principal and interest repayment conditions, change of bearer (such as other entities under local governments to undertake debt replacement funds instead of URBAN Investment Platform) and so on.At the same time, for local governments, they need to assume greater main responsibility, and specific projects, hidden debt resolution plans and debt repayment plans need to be made clear, rather than simply rollover and restructuring.3. Where are the qualified hidden debts in stock?Obviously, the rollover and debt restructuring referred to in Article 2 are not for all debts, but for the stock of implicit debts that meet the conditions.We understand that this needs to be considered from the following aspects :(1) the stock of hidden debt has been reported to the central government and recorded by the central government, which is the hidden debt that local governments and enterprises have acknowledged and cannot be resolved in the short term.(2) The turnover of the implicit debt first needs to be approved by the central government, which is a special case and a case by case discussion, and the local government should endorse and assume the main responsibility of the debt.(3) The time when the stock of hidden debt occurs needs to meet certain conditions. For example, the hidden debt generated before a certain time may not be within the scope of extension and restructuring.The measure here may depend on the point in time at which the Ministry of Finance has decreed that hidden debt cannot be added (after all, in 2018 the central government required local governments to defuse hidden debt within five to 10 years).(4) The stock of hidden debt shall have specific corresponding projects (for example, the projects registered in the Statistics and Monitoring system of hidden debt of the Ministry of Finance shall prevail), and there shall be clear debt resolution plans and repayment fund arrangements.Therefore, although the scale of hidden debt that needs to be replaced is huge, the scale of truly qualified hidden debt may be relatively limited and not so optimistic. Of course, it depends on the game between local governments and the central government. After all, the caliber mentioned above is not without buffer room.Four, in this paper, equivalent to a disguised form to admit that the guizhou region scale and the implicit debt debt pressure are very big 2, article proposes to actively revitalize the capital assets, safe stock of recessive debt, at the same time for the stock of eligible implicit debt can be resolve through extension and restructuring, which means that the country actually has admitted that the region of guizhou implicit debt scale and dissolve the pressure is very big,Special attention is needed at the policy level.Therefore, we can see that no. 2 paper proposed that substantial progress should be made in preventing and defusing debt risks by 2025.Although it is the consensus of the market that the scale of hidden debt and the pressure of transforming debt in Guizhou and other regions are very large, it is worthy of affirmation to openly admit and actively seek solutions. Of course, the effect of specific actions remains to be seen.In fact, guizhou province, in 2022 the government work report noted that “cut off by state-owned enterprises violation of local government debt channel, compaction and county government main body responsibility, resolutely curb increment, proper disposal of stock, fully activate stock assets, multi-channel dissolve the government debt, steadily reducing debt ratios, effectively guard against debt default risk”.Five, the national special care in other parts of the guizhou will again we see that for implicit debt problem in guizhou area, in addition to the clear strictly curb new, in the covert of the stock of debt as well as the local government to resolve the debt limit, countries have to give a certain policy tilt, such as the stock of eligible implicit debt may center by way of extension, restructuring, etc,Specific support should be given to the quota of local government bonds to support the construction of government-invested projects.Considering the scale of hidden debt and the areas with great pressure are not limited to Guizhou, we expect that the practice proposed in No.2 paper may be repeated in other regions, which is in line with the usual thinking of China’s policy.Six, research support in some high risk areas in lower debt risk level pilot although 2 article proposed “the support part in high-risk areas in lower debt risk rank pilot”, but in fact the guizhou province in 2022 the government work report also puts forward the compaction local main body responsibility, promote high-risk areas to reduce the debt risk level “,The effectiveness of this pilot mechanism remains to be seen.To sum up, the issuance of No. 2 document does not mean that Guizhou Urban Investment Has been stabilized, but only that the state has a higher tolerance for the hidden debt resolving work in some regions than before. It may place more emphasis on one local policy, and the policy preference is more targeted and not free of costs.In fact, after years of evolution, udic platform, local government and the creditor’s rights debt relations between and among financial institutions had turned into a sustainable relationship, this kind of relationship that needs the blessing of belief, and the disintegration of relations between sustainable will cost huge, after all this is related to a region of credit environment can fix the problem,For permanent coal events into credit contraction in henan province is one of the best lessons, so the market of guizhou province in the implicit debt resolve aspects need to be careful, though its market reputation has been basically lost, but as a representative in the western regions in guizhou province, with the national strategy of regional economy can be smoothly noted relevant,Whether hidden debt can be resolved smoothly determines whether a region will eventually become benign or fall into a vicious circle.