How To Break The Local Debt Problem In The Market Place

After the State Council issued the "opinions on strengthening the management of local government debt" in October 2nd, it can be expected that under the premise of limiting the scale of local debt to the central government, the overall regulation of local debt will accelerate the marketization in the future.

We can see that the policy logic of marketization of local debt correction has been implemented in many aspects, such as the main body of debt, the procedures of borrowing debts and the main body of responsibility.

For example, aiming at

The "opinion" clearly states that "government debt can only be borrowed by the government and its departments, and can not be borrowed through enterprises and institutions". By so doing, we can strengthen the pparency of local debt by focusing on the main body of local debt. For the main body of responsibility, "opinions" clearly emphasize that "the local government has the responsibility to repay its debts, and the central government implements the principle of no rescue", which highlights the criteria of "who borrows who is still at risk".

To standardize the local debt, we must take marketization as the direction of guidance. Only by ending the chaos of the main body of the debt before and the ambiguity of the main body of responsibility can we gradually introduce the local debt risk that has long been unable to control in recent years into a benign and sustainable development channel.

However, while affirming the general orientation of the "opinion" market, we still need to worry about whether the "opinion" will be "discounted" when it is implemented in the absence of a matching mechanism.

This is not an unfounded worry. In July 11th this year, Shandong province spontaneously returned to the local debt pilot project, and it had caused the local debt and the national debt interest rate hanging upside down. The winning rates in 5, 7 and 10 years were 3.75%, 3.88% and 3.93% respectively, which were 20, 21 and 20 basis points lower than the limit of the national debt rate before the tender date.

The local debt that was originally designed to promote marketization has also been piloted. It has finally issued a "anti market" signal in the specific implementation, which deserves our vigilance.

More worthy of our introspection, in the direction of market-oriented guidance, regulate local debt need to co-ordinate the advance.

To promote local debt market as a whole, we should first break the right of local governments to control financial resources including Financial deposits.

The reason why the local debt and the interest rate of the national debt are hanging upside down is that the local governments have too much control over the financial resources of their territories, and only include financial deposits.

In order to truly establish the market pricing mechanism of local debt risk and return, we must effectively marketization.

Second, we must introduce

To participate in the local government's credit rating, in order to more effectively and timely prompt the financial risks of local governments, in order to reduce the problem of investors' asymmetric information on local debt.

If the issuance of local unidirectional debt information is not only difficult, it will be difficult for investors to take heart.

For the present, under the continuous accumulation of local debt risk, we should take marketization as the core starting point to straighten out the relationship between responsibilities and responsibilities of local debts, improve the efficiency of local debt utilization, or prevent systematic risks of local debts.

If we want to standardize the marketization logic of local debt, we should promote the marketization of local financial resources allocation and local debt credit rating as soon as possible. Only when we comprehensively promote co-ordination can we really achieve the closed loop effect of local debt marketization.