What's Another Trillion

Bloomberg: China Said to Consider Extra 1 Trillion Yuan Debt-Swap Quota
China is considering allowing another 1 trillion yuan ($161 billion) of local government debt swaps, according to people familiar with the matter.

The plan has yet to be finalized because the Ministry of Finance needs to discuss it with the National People’s Congress and seek State Council approval, the people said Tuesday, asking not to be identified because the talks are private.

The new quotas will be in addition to the 2 trillion yuan already granted as part of a program to convert high-cost existing debt maturing this year into low-yielding municipal bonds. Local authorities have 1.86 trillion yuan of debt that matures in 2015, as well as a further 919.3 billion yuan in contingent liabilities, according to a government audit report based on data as of June 2013.

“This is virtually the central government offering local authorities more credit and targeted interest-rate cuts,” said Zhao Yang, chief China economist at Nomura Holdings Inc. in Hong Kong. “The additional quota will benefit the economy because lower costs of government-led projects will help boost investment.”
Six months later, another article on tight credit at banks and another on rising financing costs for small businesses.......

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