Bond Swaps Accelerate

People's Daily: Debt-for-bond swap quickened to lower local govts' burden

China has accelerated debt-for-bond swaps for local governments, adding more than 2 trillion yuan ($306.7 billion) since the start of the year, more than half of last year's 3.2 trillion yuan, reported the Economic Information Daily on Friday.

Of the total 2.2 trillion yuan bonds raised by local governments since the start of the year, over 90 percent were debt-for-bond swaps, according to the paper, as China aims to ease financing burden for local governments.

Related: PBOC Says Sharp Drop in Lending Due to Local Government Debt Swaps

In its statement, China’s central bank said that the reduction in lending was a result of multiple factors. The first variable was an increase in local government debt swaps which accounted for roughly 350 billion Yuan. Seasonal factors contributed to the decline in loans as well with members emphasizing that the first quarter typically witnesses heightened lending. In addition, the PBOC is pressuring banks – using asset background quality control - to be more cautious when lending to avoid bad loans. These measures come amid a backdrop where the nation’s debt-to-GDP ratio is now above 240%.