prc30 on Nostr: This #China headline is getting a ton of traction. Thought I’d add some context. ...
This #China headline is getting a ton of traction. Thought I’d add some context.
First, no doubt that the number is real and probably even larger. Second, this – right here – is what Beijing has been attempting to address. It is also the reason why there’s been no fiscal stimulus announced so far.
The aim, from what I can decipher, is that Beijing’s priority is to issue trillions of RMB in “special purpose” bonds. The majority of the proceeds are expected to be deployed to address this very issue; the so called non-standardized local government debt.
Left pocket, right pocket. Fiscal from Beijing directed to local governments would have a net zero economic impact. So be mindful when you start seeing headlines with “TRILLION TO BE INJECTED INTO CHINESE ECONOMY”. What is actually expected is for the proceeds of these bonds to “call in” the non-standardized debt and, therein, simplify (provide greater transparency) the balance sheets of local governments.
I would finish by stating that this has been an ongoing process for two years. It required an audit for all local governments the majority of which haven’t yet finalized.
First, no doubt that the number is real and probably even larger. Second, this – right here – is what Beijing has been attempting to address. It is also the reason why there’s been no fiscal stimulus announced so far.
The aim, from what I can decipher, is that Beijing’s priority is to issue trillions of RMB in “special purpose” bonds. The majority of the proceeds are expected to be deployed to address this very issue; the so called non-standardized local government debt.
Left pocket, right pocket. Fiscal from Beijing directed to local governments would have a net zero economic impact. So be mindful when you start seeing headlines with “TRILLION TO BE INJECTED INTO CHINESE ECONOMY”. What is actually expected is for the proceeds of these bonds to “call in” the non-standardized debt and, therein, simplify (provide greater transparency) the balance sheets of local governments.
I would finish by stating that this has been an ongoing process for two years. It required an audit for all local governments the majority of which haven’t yet finalized.