The just-passed 2015 budget report stated that in 2015, local government fiscal deficits were 500 billion yuan, and the balance between government funds' revenue and expenditure was 100 billion yuan. The State Council approved the issuance of local government bonds to make up for it. Previously, the spokesperson of the Ministry of Finance announced at a press conference during the two sessions, "With the approval of the State Council, the Ministry of Finance has recently issued a quota of 1 trillion yuan in local debt replacement bonds, allowing local governments to convert part of the high-cost debt that has matured. into local government bonds.”

"The above-mentioned local government bonds have their own uses, and it is expected that most of them will be issued through local government voluntary self-repayment." said Huo Zhihui, chief analyst of China Bond Rating Corporation.

Huo Zhihui said that according to Article 35 of the New Budget Law, “Part of the funds necessary for construction investment in the budgets of provinces, autonomous regions, and municipalities approved by the State Council can be issued through local governments within the limits determined by the State Council. This year, the State Council approved the issuance of 500 billion yuan of local government general bonds and 100 billion yuan of local government special bonds.

It should be pointed out that since 2015, my country has implemented balance management of local general debts in comparison with central government bonds. Within the limit, debts due in the current year can be borrowed to repay old ones, and they are no longer included in the amount of debt issuance. deduction, this means that the 500 billion yuan of local government general bonds issued this year will not include the funds for the principal repayment of local bonds due in 2015. Therefore, overall, the 500 billion yuan of local government general bonds and 100 billion yuan of special bonds mentioned in the 2015 budget report will be used for necessary construction investment expenditures within the budget in accordance with the provisions of the new budget law, as well as for certain income. Construction expenditures for public welfare projects.

"The issuance of 1 trillion yuan in replacement bonds is a powerful measure for my country to steadily solve the problem of local government debt repayment. It is also a continuation of the central government's consistent thinking of strengthening local government debt management." Huo Zhihui said that last year The "No. 43 Document" "Opinions on Strengthening the Management of Local Government Debt" issued by the State Council clearly stated: "For the existing local government debt that has been screened and included in budget management, each region can apply for the issuance of local government bonds to replace it to reduce the interest burden. Optimize the term structure and free up more funds for the construction of key projects." Therefore, the 1 trillion yuan bond replacement quota approved by the State Council will be fully used to replace part of the high-cost debt due by local governments. This is just a change in the form of debt. It does not increase the debt balance and will not increase this year's fiscal deficit. At the same time, since the existing local government debt is still in the process of being sorted out and has not been included in the fiscal budget statement, this 1 trillion yuan of replacement bonds cannot be reflected in the 2015 budget report.

Huo Zhihui said that as a type of credit bonds, local government bonds have always been publicly issued on exchanges and inter-bank markets and purchased by market investors.

In 2014, the Ministry of Finance has piloted self-repayment of local government bonds in 10 provinces and cities. When answering reporters’ questions during the two sessions, Finance Minister Lou Jiwei clearly mentioned that “in the future, most of them will be prepared to ask local governments to pay back their own funds.” Therefore, it can be expected that 500 billion yuan of local government general bonds and 100 billion yuan of special bonds will be publicly issued in 2015, and most of them will be self-repayable.

“Since ‘Document No. 43’ has clarified that local governments can issue bonds to replace existing debts, the approved 1 trillion yuan replacement bonds are essentially general bonds issued by local governments to replace existing debts or "Special bonds." Huo Zhihui analyzed that according to the regulations on the management of national debt balances, as long as the debt balance is within the limit, local governments can choose the issuance scale of general bonds within the quota approved by the State Council according to their own replacement needs.

Considering that a large part of the current local government debt stock is formed by government financing platforms through land mortgage and pledge loans, it will also be a better choice for local governments to issue special bonds to replace high-cost debt with future land transfer revenue as support. choose. "It is not feasible for the People's Bank of China to directly purchase replacement bonds as rumored in the market. The replacement bonds will be issued on the exchange or the inter-bank market in accordance with the normal local government bond issuance procedures, and will be purchased by market investors, and it is expected that most of them will also be purchased. It will be done on a voluntary basis," he said.