China to Let Local Governments Offer New Bonds to Help Repay Debt; Statement Suggests Regulators Are Backing Off From Vows to Hold Local Debt in Check

China to Let Local Governments Offer New Bonds to Help Repay Debt

Statement Suggests Regulators Are Backing Off From Vows to Hold Local Debt in Check

Updated Jan. 2, 2014 12:08 p.m. ET

BEIJING—China’s state planning agency says it will give local governments more leeway to issue bonds in order to repay maturing debt. Companies set up by local governments, often called local government financing vehicles, can issue new bonds to help repay maturing debt on time and ensure that work continues smoothly on existing infrastructure projects, the National Development and Reform Commission said.The state planning agency made the remarks in a statement posted on its website Tuesday amid fresh data showing that local governments are facing mounting financial pressures. It suggests that it is giving local governments more leeway to raise funds as they face mounting pressure to repay older debt. A total of 100 billion yuan ($16.5 billion) of bonds issued by local government financing vehicles is expected to mature in 2014, the NDRC said.

China has vowed to hold ballooning local government debt in check, but the latest statement by the planning agency suggests that regulators are backing off from some of their tougher talk.

In late 2012, the NDRC said it would step up supervision of local government bonds to control mounting repayment risks.

China’s National Audit Office said Monday that debt and guarantees issued by local governments had surged 67% to 17.9 trillion yuan as of the end of June since the last tally of local debt at the end of 2010, when it totaled 10.7 trillion yuan. Almost 40% of that amount will have matured by the end of this year, placing huge pressure on local governments to come up with the funds to make repayment.

The NDRC, which is one arm of the government that approves debt offers, also said it would allow some new debt offerings by local government companies that were taking on new debt to replace older, costlier debt. Most of the country’s local governments are forbidden from raising funds directly, but they frequently set up companies to sidestep those restrictions.

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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