Curb hidden debt growth

The aforementioned 26 trillion yuan of local government debts are explicit debts. Experts generally believe that the current risks of this explicit debt are safe and controllable. However, because some local governments violated laws and regulations to raise debts in the past few years, the hidden debts of local governments have grown rapidly and on a large scale. The hidden debt risks have attracted much attention.

Former Deputy Minister of Finance Zhang Hongli said at the recent seminar on the sustainable development of government debt under the new pattern that the scale of local implicit debt is large, lacks transparency, and it is more difficult and costly to prevent and resolve. Due to statistical caliber and other factors, the various parties’ estimates of the implicit debt of local governments are quite different. According to IMF (International Monetary Fund) calculations, at the end of 2018, the scale of hidden debts of local governments in my country reached 30.9 trillion.

This risk has long attracted high-level attention. Prior to this, the relevant departments have investigated and rectified the scale of hidden debt. In 2018, the central government issued a document to prevent and resolve the hidden debt risk of local governments. Various localities have successively introduced plans to resolve existing hidden debts in 5 to 10 years.

In the above article, Liu Kun devoted a paragraph to the prevention and resolution of hidden debt risks of local governments during the “14th Five-Year Plan” period.

He said that perfecting the normalized monitoring mechanism will never allow new projects or pave the way through new hidden debts. Strengthen the supervision of state-owned enterprises and institutions, improve the funding mechanism of local governments and their departments to enterprises and institutions in accordance with the law, and strictly prohibit local governments from increasing hidden debts in the form of corporate bonds. Developmental and policy-oriented financial institutions must operate prudently and compliantly, comprehensively consider project cash flow, collateral and other prudential credit granting, and strictly prohibit illegally providing financing to local governments or cooperating with local governments to raise debts in disguise. Clean up and standardize local financing platform companies and divest their government financing functions.

Qiao Baoyun said that the Minister of Finance talked about hidden debt risk prevention at a large length, indicating that the central government will make great efforts to solve this problem in the future. Moreover, the focus of future work is still to give priority to curbing the growth of hidden debts. In addition to the local governments and financing platforms that focus on supervising the demand side of illegal debt, it also emphasizes the key supervision of illegal debt financing providers, which includes development and policy. Financial institutions.

Mao Jie believes that to curb the formation of hidden debts from illegal borrowing by local governments, in addition to strengthening the supervision of state-owned enterprises, public institutions, local government financing platforms, developmental financial institutions, and other financial institutions, it is also necessary to promote the transformation of local government functions from a large package. The construction is shifted to focus on public services, and the motivation for borrowing is reduced.

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In addition to curbing the growth of hidden debt, resolving the huge amount of hidden debt is also a major challenge for all regions. The current ways for local governments to resolve existing hidden debts include arranging repayment of fiscal funds; transferring government equity and repayment of operating state-owned assets; using project carryover funds and operating income to repay; converting compliance into corporate operating debt; Repayment, repayment, renewal, etc., and bankruptcy reorganization or liquidation to resolve.

Liu Kun stated in the above article that during the “14th Five-Year Plan” period, it is necessary to improve the market-oriented and legalized debt default handling mechanism and resolutely prevent the accumulation of risks from forming systemic risks.

Ji Fuxing believes that due to the economic downturn and the “tight balance” of fiscal operations, it is difficult to resolve the stock of hidden debts as scheduled, the rigid growth of new expenditures is rapid, and the financing balance is difficult. In the future, we need to break the belief in urban investment, soft budget constraints, and rigid payment. The central government will not cover debts for local governments and local governments will not cover debts for enterprises.

Qiao Baoyun believes that the resolution of existing hidden debts is very complicated, and the future resolution of debts needs to be done in accordance with market rules, and many local governments are now unable to find the bottom line.

Mao Jie said that to resolve the underlying hidden debt from the root cause, it is necessary to promote the market-oriented transformation of local government financing platform companies and become independent state-owned enterprises, isolating platform company credit and government credit.

Wen Laicheng said that at present, it is necessary to unify the definition of hidden debts of local governments, and then establish corresponding statistics, monitoring and release systems, so as to achieve the purpose of effectively managing hidden debts in accordance with the law.

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