To process debts.. China sells government bonds for $206 billion

The “Caixin Global” newspaper reported that the Chinese central bank is studying an emergency plan with banks through which it grants local government financing instruments low-cost financing through the sale of special bonds for 1.5 trillion yuan (206 billion dollars) with longer maturities to address the risks caused by growing debt. As quoted by “Bloomberg”.

If approved, the move will give cash-strapped local government financing vehicles access to funds to improve cash flow and avoid short-term liquidity pressures.

12 provinces and cities were classified as “high-risk” areas, including the provinces of Guizhou, Hunan, Jilin and Anhui, as well as the city of Tianjin, and the IMF estimated their debt at 7.8 trillion dollars last year.

“The reported plan regarding the central financing initiative will be a very significant change from previous efforts, in terms of providing the necessary liquidity to address local government debt and reduce their problems,” said Tommy Shi, economist at overseas China Bank Corp.

In addition to low-cost financing of local government financing instruments, Beijing is also considering plans to reduce its debt.

In this regard, “Bloomberg News” reported earlier that the authorities are considering allowing provincial-level governments to raise about a trillion yuan through private bond sales to resell the debt of local governments and other off-balance sheet issuers.

While it is not yet clear when those refinancing bonds will be issued, the revisions are expected to be submitted in one to two weeks.