2015-05-13

China Tries to Prod Banks Into Buying Local Government Debt

This won't work unless the banks want to make more loans.

China Launches Stimulus Aimed at Local Debt Crisis
China is launching a broad stimulus to help local governments restructure trillions of dollars in debts while prodding banks to lend more, as fresh data added to signs of a worsening slowdown in the world’s second-largest economy.

In a joint directive marked “extra urgent,” China’s Finance Ministry, central bank and top banking regulator laid out a package of measures to jump-start one of the government’s most important economic-rescue initiatives: a debt-for-bond swap program aimed at giving provinces and cities some breathing room in repaying debts.

Central to the directive is a bigger-than-expected plan by the People’s Bank of China that will let commercial banks use local-government bailout bonds they purchase as collateral for all kinds of low-cost loans from the central bank. The goal is to provide Chinese banks with more funds to make new loans.

More coverage at ZeroHedge: China Goes "Unconventional" In Effort To Tackle Trillions In Debt, Rescue Economy

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