Comment: The CITICs issuance plan was rejected under the ＂bond＂ tone of the two

Source: Bloomberg

As Chinese officials have increased their efforts to curb the risks brought about by high local debt companies, the difficulty of issuing new debt in China Government financing platforms (urban investment companies) has greatly increased.In the context of the two sessions of the "coordinating the resolution of local debt risks", analysis and predicting that the net financing of urban investment bonds this year is still tightening.

From January to February, the regulatory agency terminated the application for issuance of 53 new city investment bonds, with a total amount of 75.2 billion yuan (S $ 14.3 billion).Both data are the highest level of the same period since the global rating of the global rating of 2021.In contrast, only 11 urban investment bonds were rejected a year ago, with a total amount of 17.2 billion yuan.

The regulatory agencies that review the urban investment bond plan include the Shanghai Stock Exchange and the Shenzhen Stock Exchange, as well as the China Banking Market Dealer Association.

The trend began in July last year and reached its peak in the fourth quarter.In July, China listed financial risks such as the surge in local debt as a priority.In February, there was a long holiday of the Spring Festival, and the period of termination of the issue of issuance slowed down.

"This indicates that since the fourth quarter of last year, supervision has continued to tighten and has not yet seen signs of relaxation," Laura Li, general managing director of S & P director, said when talking about debt issuance transactions ended in the past two months."This shows that the issuance of low -quality and low -rated urban investment bonds in the future is becoming more and more difficult to issue, including urban investment bonds from rich provinces such as Jiangsu and Zhejiang."

The government work report issued by the two conferences of China this week proposes to coordinate the resolution and stable development of local debt risks, further implement a package of debt plans, properly resolve the risk of stock debt, and strictly prevent new debt risks.

Zhao Yuqing, a senior director of the international public financing rating in the Asia -Pacific region in Asia Pacific, said in a review of the above -mentioned policy guidelines that it is expected that the net investment bond financing this year is still tightening.The growth of financing will gradually be driven by the growth of special bonds rather than urban investment bonds.

As the real estate market is in trouble to China, the decision -making layer faces a difficult battle on solving the issue of US $ 9 trillion (S $ 12 trillion).Real estate is an important source of income for local officials.Therefore, the government is transferring the pressure on financing growth that stimulate economic growth to the central government, including the large -term special Treasury bonds planned to issue 1 trillion yuan this year, which is the fourth issue of such bonds in the past 26 years.

China also launched a debt replacement plan of more than 1 trillion yuan at the end of September last year, allowing local governments to replace hidden debt into bonds with low interest rates.The total number of urban investment bonds due this year will reach a record high of 4.65 trillion yuan.

Borrow new and old

Wang Chen, co -founder of Credit Risk Consultation and Quantitative Analysis Company Silk Road Ocean, said that most of the income of Xinfa City Investment Bonds is used to repay the old bonds, highlighting the tendency of strict restrictions.

According to the data of Zhongtai Securities, from January to February, the total issuance of urban investment bonds totaled 781 billion yuan, a year-on-year decrease of about 4.6%.In a report, the Sino -C Securities Pengyuan rating stated in a report that in January, the newly -returned old rate was as high as 97%of the newly repaid urban investment bonds.

Zhao Yuqing pointed out that appropriate new financing can smooth the capital flow due to the expected or delayed process of the project during the implementation of the project;Daily funds and liquidity management have improved requirements.

Wan Huawei, the president of United Credit, said in a forum in Beijing on Thursday that the pressure of city investment bond payment will continue to increase in 2024, and credit levels have intensified.He pointed out that the weak land market led to the decline in local government fund income, the pressure on local government's funds increased significantly, and some weak areas, weak -funded quality urban investment enterprises' debt financing capabilities and debt resources were relatively weak.

"Considering the requirements of the bottom line of risk prevention, the risk of disclosure of market debt default in urban investment enterprises in the short term, but the risk of technical breach of contract and non -standard default risks has increased," he said.