Yuan HaixiaHe is a key member of the China Macroeconomic Forum (CMF) and the executive director of the China Chengxin International Research Institute
This article**Since November 14th, Financial Mayflower***
Number of words: 6890 words.
Reading time: 18 minutes.
After the 20th National Congress of the Communist Party of China, the importance of local debt risks has continued to increase. The Politburo meeting of the Communist Party of China held on July 24, 2023 pointed out that a "package of debt plans" will be formulated and implemented. From October 30th to 31st, the ** financial work conference pointed out that a long-term mechanism for preventing and resolving local debt risks should be established, a ** debt management mechanism compatible with high-quality development should be established, and the ** and local ** debt structure should be optimized.
Changing the debt formation mechanism
Finance: Since 2023, the top-level design has repeatedly mentioned the resolution of local ** debts. The reform of the fiscal and taxation system has always been regarded as a key measure, what is your view?
Yuan HaixiaIt is necessary to strengthen the capacity building of local governance through in-depth mechanism reform. First, continue to promote the reform of the fiscal and taxation system, promote the matching of rights, responsibilities and interests at all levels, and promote the transformation of the debt formation mechanism. In the context of the increasing pressure on fiscal revenue and expenditure and the change of the local assessment mechanism, the local debt has increased significantly, and the scale of debt has continued to rise, so it is necessary to fundamentally continue to promote the reform of the fiscal and taxation system.
Looking further, it is necessary to continue to promote and implement the reform of the fiscal authority and expenditure responsibility of the central and local governments. For example, since 2016, China has carried out the reform of the division of fiscal powers and expenditure responsibilities between the central and local governments in 14 areas, and the follow-up work needs to be further implemented and broadened in the areas of reform, especially for areas with greater pressure on local rigid expenditures such as education, medical care, and social security.
In addition, it is necessary to speed up the reform of the financial system at the provincial and sub-provincial levels, pay attention to increasing overall planning at the provincial level, stabilizing grassroots incomes, reducing the burden on grassroots units, and solving the problem of local debts at the source.
Second, strengthen the capacity building of local governance and build a long-term mechanism for local debt management. First of all, we should promote the "combined supervision" of implicit debts and statutory debts, improve the debt information disclosure system, and carry out information disclosure according to a certain time frequency and comparable statistical caliber, so as to reasonably guide and stabilize the expectations of all parties. Secondly, in order to establish and improve the local ** balance sheet, it is also the basis for controlling the increase and even adding to the increment, and it is necessary to comprehensively sort out the ownership, nature and value of various types of real estate, management rights, charging rights, state-owned enterprise equity and other assets, clarify the scale of realizable assets, and provide a more valuable reference for subsequent debt expansion from the perspective of asset-liability matching.
Third, further improve the forward-looking risk early warning mechanism, including hidden debtsImprove the evaluation index system based on debt ratio, explore the construction of early warning models in more scenarios on the basis of the assessment of "red, orange, yellow and green" (local ** debt risk level), and strengthen the application of early warning results; Finally, consolidate the main body of responsibility, improve and strictly implement the lifelong accountability system for debt borrowing and the mechanism for back-checking debt problems, and further strengthen the accountability for illegal debt borrowing and inaction.
Fourth, it is necessary to further deal with the relationship between the market and the marketOn the one hand, we should further clarify the boundaries between the market and the market, gradually strip the expenditures in those areas that can be solved by the market mechanism from the supply scope of local finance, and optimize the structure of fiscal expenditure; It can also better attract social capital to participate in economic construction. On the other hand, relying on the reform of state-owned enterprises, we will continue to accelerate the transformation of urban investment, gradually strip the financing function, and improve the operational efficiency of state-owned enterprises by shutting down and eliminating ineffective state-owned enterprises.
Finance & Economics: How to balance the relationship between economic growth and the optimization of the debt structure?
Yuan HaixiaFirst of all, it is necessary to reasonably determine the scale of ** debt from the perspective of sustainability, and pay attention to the matching of assets and liabilities. Grasping the inverted "U" shaped relationship between ** debt and economic growth can reasonably define the expansion space and sustainability of new debt in the future based on the perspective of "asset-liability", but this basis is that it is necessary to establish and improve the balance sheet of local **.
On the asset side, we should fully consider the carrying capacity of GDP (gross domestic product), comprehensive financial resources, and local state-owned enterprise assets on debt, and pay attention to the guarantee role of the huge state-owned assets owned by local ** in resolving debt risks; On the liability side, we should not only consider the scale of debt, but also pay attention to the risk differentiation brought about by the diversification of the current bond fund investment areas and the efficiency of debt use in different regions.
In addition, from the perspective of rating, the final credit rating results of provincial** after considering external support are all AAA, but the results of basic credit rating without considering external support factors show a large difference, and the debt ratio and debt ratio performance of entities with higher basic credit ratings can be used as a reference basis for determining the optimal scale of local debt.
Second, on the basis of rationally defining the scale of local debt, we should further optimize the debt structure. First, it can be moderately leveraged, and at the same time, considering that the fiscal balance ability of the grassroots level in China's western provinces, districts and counties is weak, it is necessary to carry out regional balance of financial resources by increasing transfer payments.
The second is to rationally optimize the structure of local bond issuance and promote the effective transformation of "debt-assets". In the allocation of local ** debt limits, the use of special bond quotas in various regions and the actual local needs can be combined to further optimize the allocation ratio of general bonds and special bonds, so as to avoid problems such as misappropriation of bond funds.
Finance: But there is a contradiction between growth and risk.
Yuan HaixiaYes. Since the epidemic, the local ** debt ratio and debt risk have generally increasedTherefore, it is possible to study the dynamic adjustment of the "red, orange, yellow and green" standards, and appropriately and indirectly relax the financing restrictions of financing platforms under the premise of resolutely "curbing increments" and "strictly blocking the back door".Categorical treatment to ensure reasonable financing needs, so that risk mitigation and growth needs can be matched.
Financing platforms have long faced problems such as debt structure and business structure, maturity and cash flow mismatch, although a large number of public welfare and basic assets have been formed, but the income is low, it is difficult to realize, highly dependent on refinancing for debt rollover, and the phenomenon of "borrowing short and investing long" is widespread.
At present, under the supervision of the "red, orange, yellow and green" classification of the exchange and the Ministry of Finance, the three major financing channels of credit, bonds and non-standard of urban investment enterprises are restricted to varying degrees, and the financing of some weakly qualified urban investment enterprises is facing regional and main body tightening.
In order to further balance risk mitigation and growth needs, it is recommended that under the premise of continuing to promote the above financing restriction measures, the financing restrictions on financing platforms should be appropriately optimized in combination with the progress of local debt and the level of debt risk, such as dynamically adjusting the "red, orange, yellow and green" standards to ensure the reasonable financing needs of regions or entities where debt risks have significantly decreased, so as to cope with liquidity problems.
Finance and Economics: Different resource endowments in different regions, how to promote the resolution of ** debt according to local conditions?
Yuan HaixiaFirst, for the stock of implicit debts, the main responsibility should be consolidated and classified and screened. For regions with relatively good economic and financial resources, relatively acceptable platform credit strength, and sustainable development of debt, they are encouraged to accelerate project construction under the condition of legal compliance and solve debt problems in the process of development; For regions with high debt pressure and loss of market confidence, in order to maintain the regional credit environment, debt swaps and the use of state-owned equity can be further used according to the type of debt.
Second, we will promote debt swaps and restructuring in an orderly manner, and continue to exchange time for space and low interest rates for high interest rates to mitigate risks. In terms of bond swaps, we will accelerate the replacement of special refinancing local bonds and continue to promote the explicit nature of implicit debts; It can also continue to issue replacement urban investment bonds and borrow new ones to repay old ones, so as to alleviate the rolling pressure and liquidity risk of urban investment enterprises' debts at maturity.
In terms of loan replacement, we can continue to prudently promote the restructuring of credit and non-standard debts of urban investment enterprises in high-risk areasHowever, it is necessary to pay attention to the damage to the interests of creditors caused by restructuring plans such as sharp interest rate cuts and long-term extensions.
In addition, considering that there is still room for leverage, and the scale of implicit debt is still large, a new round of large-scale, orderly and transparent local debt swaps with leverage can be studied and carried out on the premise of debt classification and screening, so as to minimize the macro cost of solving the debt problem.
For debts arising purely from the provision of public goods,It can be replaced in the form of long-term treasury bonds issued by the first grade, smoothing the debt repayment pressure in the form of lower interest rates and longer-term forms, and appropriately tilting to the regions in the central and western regions where the debt pressure is greater and it is difficult to rely on itself to reduce debts, and to prevent local moral hazard through institutional design.
For local ** debts incurred due to other reasons,It is necessary to seek the establishment of a risk-sharing mechanism between local governments and financial institutions, especially for the central and western regions with high risks, it is necessary to make overall arrangements for the role of debt responsibility, make reasonable use of resources, and avoid blindly promoting loans and non-standard debt swaps, resulting in excessive and excessive risk transmission to financial institutions, resulting in regional and systemic risks.
Localities with abundant financial resources will continue to arrange for financial funds to turn into debts, make rational use of land resources, and speed up land transfers. In the context of weak economic recovery, most regions are under fiscal pressure and it is difficult to move budget funds, but a few regions with strong economic and financial strength can continue to advance, such as Jiangsu, Zhejiang, Shandong, Shanghai, Fujian and other regions with strong comprehensive financial resources and high fiscal balance rates in 2022.
In addition, land transfer income is also an important fund for local debt, in 2022, Shanghai, Zhejiang, Jiangsu land transfer income decline is small, there has not yet been a land financial gap, Shanghai, Hainan, Fujian, Zhejiang, Jiangsu and other places land transfer income coverage of regional debt interest expenses is higher, the above areas can still raise funds through land transfer to help resolve the first debt.
Actively give full play to the resource advantages of local state-owned enterprises, and prudently reduce debts according to local conditions. For example, Guizhou's "Moutai bond" model has reference significance for the central and western provinces with high-quality listed state-owned enterprises in the jurisdiction.
In addition, we will increase the efforts of infrastructure REITs (trust investment**) to revitalize existing assets, reduce dependence on debt financing, and use ** capitalized debt. It can also rely on the reform of state-owned enterprises to accelerate the classification transformation of financing platforms, improve credit qualifications, enhance refinancing capabilities, and help resolve debts.
Explore local fiscal transformation
Finance: The scale of state-owned assets is relatively large, much higher than that of local ** debt. Why can't we solve the local debt problem?
Yuan HaixiaAlthough the stock of state-owned assets is large, it is difficult to dispose of or realize assets, and it needs to be treated by classification and land, and it is easy to cause risks such as loss of state-owned assets. First, China's non-financial state-owned assets have exceeded 300 trillion yuan, but the vast majority of assets lack liquidity, are inefficient, difficult to generate direct economic returns, and have poor realizability and ability, making it difficult to achieve expected returns.
Second, at present, the pricing mechanism of China's state-owned assets, especially the pricing mechanism of state-owned non-listed companies, still needs to be further improved, and the problem of loss of state-owned assets is prone to occur in the process of solving the local debt problem, and there is a certain risk of integrity.
Third, China's state-owned assets are mostly concentrated in important industries and key areas related to the national economy and people's livelihood, involving a large number of stakeholders and complex relationships, which are prone to have a negative impact on basic people's livelihood security and national strategic security in solving local debt problems, and it is difficult to promote them as a whole.
Finance: Infrastructure is the main destination of local debt funds. How to provide long-term stable and low-cost infrastructure funding has always been a challenge.
Yuan HaixiaInfrastructure projects usually have the nature of public welfare or quasi-public welfare, and financial funds still need to play a supporting and guiding role, but in the context of the overall tight balance of finance, low-cost bond funds are still an important fund for infrastructure projects, and they are also an important starting point for guiding and leveraging social capital to expand effective investment.
On the one hand, government bonds are still the low-cost funds with the highest margin of safety and long-term stability, and the current leverage ratio of China's first-class sector, especially the first-class leverage ratio, is relatively low, and there is still some room for borrowing.
On the other hand, as an important component of the active fiscal policy, local bonds can meet the needs of local economic development and effectively solve the problem of local financing, and have become one of the important tools of China's macroeconomic regulation and control. Local governments still need to maintain the front-door opening, reasonably formulate new quotas for local bonds, especially special bonds, and further optimize the bond structure.
Financial resources can be strengthened to support infrastructure, which can be divided into the following aspects:
First, the People's Bank of China (PBoC) will provide low-cost funds for infrastructure construction and increase policy support, providing financial support for key projects through special re-lending and support programs, and at the same time, commercial banks that have completed the loan targets for infrastructure projects can appropriately reduce the statutory reserve ratio.
Second, policy banks should increase the provision of low-cost credit and relaunch policy-based development financial instruments in due course. Policy banks can speed up project review and evaluation based on the importance and characteristics of projects, increase the provision of low-cost credit, and give priority to supporting long-term projects; At the same time, policy-based developmental financial instruments can be launched in a timely manner, cooperation with commercial banks should be strengthened, and the guiding and leveraging role of policy banks should be brought into play.
Third, commercial banks can study the types of special loans based on the characteristics of the project and improve the level of refined pricing, including extending the term, reducing the interest rate, and special subsidized loans.
Caijing: Land finance plays a special historical role in the national economic cycle, how do you think about its current transformation?
Yuan HaixiaFrom the perspective of land fiscal dependence, the land fiscal dependence on land only considering land transfer income continues to exceed 30%, and if land-related taxes are considered, the land fiscal dependence rises to about 50%, and the dependence of local finance on land continues to deepen.
On the whole, land finance has played a positive role in China's urbanization process, a large number of infrastructure construction, and rapid economic development in the past few decades, but at the same time, it has also given rise to problems such as industrial structure imbalance, inefficient resource allocation, and hidden debt growth, and the fragility of local finance, which is highly dependent on land finance. Under the current deep adjustment of the real estate industry and the downward pressure of the economy, the land finance gap is prominent, and the local credit system based on land credit needs to be changed urgently.
In the context of unsustainable land finance and prominent gaps, the transformation of local finance can be explored in the following ways:
First, we will continue to deepen the reform of the financial system and improve the distribution of revenue and expenditure between the central and local governmentsOn the one hand, it is necessary to appropriately shift the responsibility for local expenditures in the fields of education, social security, and medical care. According to estimates, if it is moved up by 10%, it can reduce the pressure of more than 700 billion yuan of local fiscal rigid expenditure. On the other hand, in conjunction with the tax reform, we will further improve the division of tax revenue between the central and local governments, and reasonably cultivate new tax sources. For example, optimize the VAT refund system and increase the proportion of VAT refund and refund.
In addition, in the current critical period of transformation of old and new kinetic energy and economic development transformation, we can accelerate the development of new kinetic energy while maintaining traditional kinetic energy, and on this basis, explore and expand new tax sources according to the development and necessity of the situation, such as green tax, data tax and other new directions.
Second, we should give full play to the financial role of state-owned capital and expand the scale of revenue from the "third account."The total assets of state-owned enterprises (non-financial) in 2021 were 3083 trillion yuan, the estimated net profit is 28 trillion yuan, but the scale of state-owned capital operating income is small, only 568.9 billion yuan in 2022, less than 02%, accounting for less than 1 percent of the total fiscal revenue5%, the proportion of profits of state-owned enterprises handed over to the treasury still has room for improvement. In addition, in the transformation of local finance, it is necessary to continue to increase transfer payments to reduce the drag of the decline in land transfer revenue on local finance.
Prevent financial institutions from taking risks
Caijing: How do you evaluate the model of financial institutions' participation in the restructuring of Zunyi Urban Investment, and will more regions adopt this method in the future?
Yuan HaixiaIn recent years, the policy has repeatedly emphasized the prevention and resolution of local debt risks. Since 2023, the policy's attention to resolving local debt risks has further increased, and Guizhou, Shandong and other places have received great attention. At present, under the general pressure of local finances, debt replacement and restructuring will become an important way to reduce debt, and banks and other financial institutions will play a more important role.
According to the calculation of China Chengxin International, the scale of local ** bonds may reach 41 trillion yuan by the end of 2023, and the scale of interest payment will reach 119 trillion yuan, accounting for 66%, and the proportion of interest payments after taking into account hidden debts will exceed 20%. In 2022, 11 provinces have used more than 10% of their fiscal revenue to pay interest on local bonds, and the proportion is even higher in regions such as Qingjihei. In the first three quarters of 2023, the proportion of urban investment bonds borrowed to repay old debts in the five provinces was as high as 100%, all of which were in the western and northeastern provinces, affecting the long-term sustainability of finances and debts.
However, due to the high scale of first-class debt and the relatively limited funds of banks, it will bring greater pressure to banks and have a certain impact on loans to other industries.
Therefore, commercial banks should participate in debt restructuring mainly on a local basis, cautiously participate in the first-class debt restructuring in some areas with higher risks and more stressed debt rollover, and choose debt types with certain returns, so as to reduce the mismatch with the cost of debt funds and the bank's operational risks.
Finance: Most of the things that local ** do have the attributes of public welfare or quasi-public welfare. What will be the sequelae if a large number of banks participate in the debt?
Yuan HaixiaOn the one hand, large-scale participation in the restructuring of ** debt will have a greater impact on banks, making their operating indicators deteriorate in the short term. Due to the large scale of hidden debts, if the loan swap is carried out nationwide, it will have a great impact on the operational stability of banks, and from the perspective of net interest margin alone, the maximum scale of debt restructuring is less than 10% of the total scale of hidden debt. At the same time, the replacement of bank loans has not fundamentally reduced the scale of debt and eliminated debt risks, and once a large-scale overdue occurs, it will lead to further deterioration of operating indicators.
On the other hand, the participation of banks in the restructuring of ** debts may have a certain impact on loans to other industries. Banks participating in debt restructuring need to issue new funds to issue loans in the short term, and the scale of loans may be accelerated, but this part of the funds is only used for high-interest debt replacement, and no deposits are derived, or to a certain extent, the growth rate of loans is diverged from the growth rate of deposits, resulting in the expansion of the bank's debt gap. In order to replenish the funds on the liability side, banks may increase the issuance of interbank certificates of deposit, resulting in an increase in the interest rate of interbank certificates of deposit, the difficulty of reducing the comprehensive cost of bank liabilities, and the low interest rate of superimposed replacement loans.
It is necessary to provide support and guarantee for the participants of chemical bonds from the level of the first system, and it is recommended to study the feasibility of issuing special bonds and special treasury bonds to supplement the capital of chemical bond banks, and explore the feasibility of special support plans for special people's banks.
Finance: The balance sheets of commercial banks have a lot of local ** debt. What is the current stability of the banking sector?
Yuan HaixiaUnder the policy requirements of controlling the increase of chemical stocks,The probability of large-scale overdue debt is low, the overall risk is controllable, and the impact on the bank is limited, but the local and tail risks are still likely to be releasedIn addition, under the policy requirements of preventing the default of urban investment bonds, there is still the possibility of increasing the non-performing risk of banks and reducing profits in weak regions or sacrificing non-standard and loan debts to ensure the redemption of bonds.
According to CCXI's calculations, the current scale of implicit debt is about 52 trillion yuan to 57 trillion yuan, of which bank loans account for about 65%. Assuming that half of the loans in high-risk areas such as Yunnan and Guizhou are overdue, the non-performing loans will increase by about 1 trillion yuan, and the overall non-performing loan ratio of commercial banks will increase from 1.2 trillion at the end of 2022 without considering the increase in the overall loan scale64% to 2Around 2%, the risk of bad performance is still rising, but it is still lower than the 2008 financial crisis 2The level of 4% is under control overall.
Finance: Places with relatively large local ** debt pressure are also often places where small and medium-sized banks are prone to risks. How can we prevent the spread of risks from one another?
Yuan HaixiaWe should grasp the balance between the coordination and pertinence of macroeconomic policies, prevent the resonance of fiscal and financial risks under the interweaving of multiple risks, and ensure that systemic risks do not occur. On the one hand, macro policies need to increase overall coordination, maintain coordination, linkage and combination, increase the coordination and cooperation of various policies, clarify the relationship between finance and finance, and the relationship between banks and banks, and do a good job of "preventing and resolving risks".
On the other hand, the main responsibilities of all parties should be consolidated to avoid the mutual transmission and diffusion of risks. Regional small and medium-sized banks need to follow the principle of risk prevention, do a good job in reviewing corporate financing risks, and prevent the transmission of financial debt risks to small and medium-sized banks; At the same time, it is also necessary to strictly assess the lending capacity of banks to avoid the transmission of risks from weakly qualified banks to local governments, and if necessary, increase support for small and medium-sized banks, enhance the capital strength and anti-risk ability of small and medium-sized banks, and at the same time, it is also necessary to make various risk disposal plans in advance to enhance the initiative and predictability to deal with risks.
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