On November 8, Caixin News reported that at 4 p.m. on November 8, the General Office of the National People's Congress held a press conference.

Minister of Finance Lan Foan: With the 6 trillion yuan debt limit approved this time, the direct increase in local debt resources amounts to 10 trillion yuan.

Minister of Finance Lan Foan introduced at the press conference of the Twelfth Session of the Fourteenth National People's Congress held on November 8 that starting from 2024, China will arrange 800 billion yuan from the annual new local government special bonds for the next five years specifically for debt restructuring, which can cumulatively replace 4 trillion yuan of hidden debts. In addition to the 6 trillion yuan debt limit approved by the National People's Congress this time, it directly increases local debt resources to 10 trillion yuan.

It is also specified that the 2 trillion yuan of hidden debts for the shantytown renovation due after 2029 will still be repaid according to the original contract.

Lan Foan stated that after the coordinated efforts of policies, the total amount of hidden debts that local governments need to digest before 2028 has significantly decreased from 14.3 trillion yuan to 2.3 trillion yuan, greatly relieving the pressure of debt restructuring.

Lan Foan: Implementing such a large-scale debt restructuring measure means that we have fundamentally changed our debt restructuring strategy.

Minister of Finance Lan Foan stated that in the current situation where some regions have large hidden debts and heavy interest burdens, not only are there risks of 'explosive defaults,' but local financial resources are also consumed. In this case, the implementation of such a large-scale debt restructuring measure signifies a fundamental shift in our debt restructuring strategy: first, it shifts from past emergency disposal to current active resolution; second, from sporadic mine clearance to comprehensive risk reduction; third, from the 'dual-track' management of hidden debts and statutory debts to the uniform and transparent management of all debts; fourth, from focusing on risk prevention to balancing risk prevention and development promotion. From the perspective of policy effects, it can play a dual role of killing two birds with one stone.

Lan foan: while solving the risks of existing debt, it is necessary to resolutely curb the growth of hidden debts.

Finance Minister Lan foan introduced that in preventing and defusing the risks of local government debt, while solving the risks of existing debt, it is necessary to resolutely curb the growth of hidden debts. The Ministry of Finance will, together with relevant departments, continue to maintain a "zero tolerance" high-pressure regulatory posture, addressing the discovery, investigation, and accountability of newly added hidden debts. It will mainly focus on three aspects.

First, the monitoring scope is more comprehensive. The Ministry of Finance is working with relevant departments to improve information sharing and regulatory coordination mechanisms, monitoring the overall situation of local governments' debt repayment responsibilities, conducting dynamic analysis, timely warnings, and risk prevention. Regarding the operational debt of financing platforms, in accordance with relevant requirements, the financial management department has already researched and formulated policy measures to support the resolution of local government debt, and we will actively cooperate to ensure the implementation of existing financial support policies.

Second, the budget constraints are stronger. Treating the avoidance of hidden debts as a "strict discipline," continuously strengthening budget management, urging local governments to legally and compliantly construct government investment projects; for government expenditure items and investment projects not included in the budget arrangements, they must not be implemented, firmly blocking the channels for local illegal and irregular borrowing.

Third, the regulatory accountability is stricter. Strengthening the collection of clues on newly added hidden debts, promptly grasping new methods and variations of illegal borrowing, promoting regulatory efforts from post-incident "firefighting" to preventive "prevention before it happens". Strictly implementing the accountability system for local governments' illegal borrowing.

At the same time, we will continue to improve the management of local government debt, accelerate the establishment of a Chinese characteristic debt system that is adaptable to high-quality development.

Lan foan: Speed up the progress of bond issuance to support local governments in their issuance work.

Finance Minister Lan Foan explained the proposal to increase the debt limit for local governments to replace the stock hidden debts for review. The Ministry of Finance will resolutely implement the decisions and arrangements of the Central Committee of the Party together with relevant departments, solidly address the issue of hidden debts of local governments. Accelerate the progress of bond issuance. Support localities in carrying out issuance work, combine with local realities, and expedite the replacement process based on priorities to reduce debt burdens and maximize the financial benefits as soon as possible.

Lan Foan: Taking a series of measures to ensure the completion of the annual budget target tasks.

Minister of Finance Lan Foan introduced that since the beginning of this year, due to various factors affecting the central and local fiscal revenues falling short of expectations, we are taking a series of measures to ensure the completion of the annual budget target tasks. From the perspective of the central government, in October, the general public budget revenue of the central government was 1.07 trillion yuan, an increase of 7.9% year-on-year, an increase of 5.5 percentage points higher than the 2.4% in September. From January to October, the general public budget revenue of the central government was 8.2 trillion yuan, showing a narrowing of the year-on-year decline compared to the period from January to September, indicating a recovery trend. In the following two months, on the one hand, while organizing income in accordance with the law and regulations, we arranged for some relevant central units to turn in a portion of special revenue to supplement central fiscal revenue; on the other hand, we strengthened the management of fiscal expenditures to ensure key expenditures, especially ensuring that central-to-local transfer payment funds are fully in place.

Lan Foan: Implementing a more forceful fiscal policy in line with next year's economic and social development goals.

Minister of Finance Lan Foan stated that, in conjunction with next year's economic and social development goals, a more proactive fiscal policy will be implemented. First, actively utilize the available deficit space. Second, expand the scale of special bond issuance, broaden the investment scope, and increase the proportion used as capital. Third, continue to issue ultra-long-term special national bonds to support the construction of national major strategic and key areas of security capabilities. Fourth, increase support for large-scale equipment upgrades and expand the varieties and scale of consumer goods for trade-ins. Fifth, increase the scale of central-to-local transfer payments, and strengthen investment protection in key areas such as technology innovation and people's livelihood.

lan foan: Our country's government still has a relatively large debt space.

Minister of Finance Lan Foan stated that compared internationally, China's government debt ratio is significantly lower than that of major economies and emerging market countries. According to statistics from the International Monetary Fund, the average government debt ratio of G20 countries at the end of 2023 was 118.2%, with Japan at 249.7%, Italy at 134.6%, the USA at 118.7%, France at 109.9%, Canada at 107.5%, the United Kingdom at 100%, Brazil at 84.7%, India at 83%, and Germany at 62.7%. The average government debt ratio of G7 countries was 123.4%. During the same period, China's total government debt was 85 trillion yuan, including 30 trillion yuan in national debt, 40.7 trillion yuan in local government statutory debt, and 14.3 trillion yuan in implicit debt, resulting in a government debt ratio of 67.5%. Looking at the purposes of borrowing, the local government debt in China has created a large amount of effective assets, mainly used for capital expenditures to support the construction of a large number of transportation, water conservancy, and energy projects, many of which are generating sustainable returns. This not only provides strong support for high-quality economic development but also serves as an important source of funds for debt repayment. Overall, China's government still has a relatively large borrowing space.

Lan Foan: This replacement can save local interest expenditures of around 600 billion yuan over five years.

Minister of Finance Lan Foan explained that this replacement, involving an intensive arrangement of 8.4 trillion yuan over the past three years, significantly reduces the hidden debt burden that local governments have had to absorb in recent years, allowing local governments to unburden themselves and be better prepared. At the same time, as the statutory debt interest rate is significantly lower than the implicit debt interest rate, the replacement will substantially save local interest expenditures. We estimate that it can save around 600 billion yuan over five years.

Lan Foan: By implementing substitution policies, the resources originally used to pay off debt can be freed up for promoting development and improving people's livelihoods.

Minister of Finance Lan Foan introduced that through the implementation of substitution policies: firstly, the resources originally used to pay off debt can be freed up for promoting development and improving people's livelihoods. Secondly, the policy space originally restricted by debt repayment pressure can be released to provide greater support for investment, consumption, technological innovation, and facilitate economic stability and structural adjustment. Thirdly, the time and energy originally used for debt repayment and risk mitigation can be redirected towards planning and driving high-quality development. At the same time, it can improve the quality of financial assets, enhance lending capacity, and be bullish for the real economy.

Lan Foan: Relevant tax policies supporting the healthy development of the real estate market have been submitted for approval according to procedures and will be launched soon.

Minister of Finance Lan Foan stated that efforts will continue to ensure the effectiveness of incremental policies. This year's incremental policies are substantial, and the stimulus effects on the economy are emerging, with many policy effects expected to continue into next year. We will intensify efforts to advance related work, implement the policies that have been introduced, and expedite the introduction of those that have not yet come out. Currently, relevant tax policies supporting the healthy development of the real estate market have been submitted for approval according to procedures and will be launched soon. The hidden debt substitution work is about to begin. The issuance of special government bonds to supplement the core tier-one capital of large state-owned commercial banks is being expedited. Fiscal bonds supporting the recycling of idle stock land, the addition of land reserves, and the acquisition of existing commercial housing for use in affordable housing are all areas where the Ministry of Finance is cooperating with relevant departments to study and formulate detailed policies to accelerate implementation.

The Standing Committee of the National People's Congress has approved an increase of 6 trillion yuan in the local government debt ceiling to replace the existing hidden debts.

It was revealed at the press conference of the 12th meeting of the 14th National People's Congress Standing Committee held on the 8th that the meeting passed the Resolution of the National People's Congress Standing Committee on Approving the Proposal of the State Council to Deliberate on Increasing the Limit of Local Government Debt to Replace the Outstanding Hidden Debts. The proposal suggests, in order to implement the decisions and arrangements of the Party Central Committee, on the basis of strengthening the main responsibilities of local authorities, to propose an increase of 6 trillion yuan in the limit of local government debt to replace the outstanding hidden debts.

Vice Chairman of the Financial and Economic Committee of the National People's Congress and Director of the Budget Committee of the Standing Committee Xu Hongcai introduced at the press conference that the proposal suggests, for the convenience of operation and early policy effectiveness, all the newly added debt ceiling will be arranged as special debt ceilings, approved once and implemented over three years. According to this arrangement, by the end of 2024, the special debt ceiling for local governments will increase from 29.52 trillion yuan to 35.52 trillion yuan.

Xu Hongcai stated that the proposal has been approved by the National People's Congress Standing Committee, and the Ministry of Finance of the State Council will promptly allocate regional quotas according to procedures, with local governments lawfully carrying out bond substitution work, and people's congresses at all levels and their standing committees will supervise the work in accordance with the law.

Xu Hongcai: The financial departments of the State Council will allocate regional quotas as soon as possible according to the procedures, and local governments will properly carry out the bond replacement work in accordance with the law.

Xu Hongcai, Vice Chairman of the Financial and Economic Committee of the National People's Congress and Director of the Budget Work Committee of the Standing Committee of the National People's Congress, announced on a press conference that on November 8, the Twelfth Meeting of the Fourteenth Standing Committee of the National People's Congress voted to pass the "Resolution of the Standing Committee of the National People's Congress on Approving the Proposal of the State Council to Submit for Deliberation the Increase of the Local Government Debt Limit to Replace the Outstanding Implicit Debt." The "Resolution" agreed with the report of the Financial and Economic Committee's review results and decided to approve the proposal to increase the local government debt limit to replace the outstanding implicit debt. In order to further do well in preventing and resolving local government debt risks, the review report put forward suggestions around implementing the bond replacement policy accurately, strengthening local government responsibilities, resolutely curbing the growth of implicit debts, accelerating the reform and transformation of financing platform companies, and quickly establishing a government debt management mechanism that is suitable for high-quality development. The proposal has been approved by the Standing Committee of the National People's Congress, and the finance department of the State Council will allocate regional quotas as soon as possible according to procedures. Local governments will carry out bond replacement work in accordance with the law, and people's congresses at all levels and their standing committees will supervise the work in accordance with the law.

Xu Hongcai: Strengthen the supervision of government debt management.

Xu Hongcai, Director of the Budget Work Committee of the Standing Committee of the National People's Congress, stated that in the next step, the Standing Committee of the National People's Congress will thoroughly implement the deployment requirements of the Party Central Committee, strengthen the supervision of government debt management in accordance with relevant legal provisions, including the supervision of statutory debts, hidden debts, especially the tracking and supervision of the implementation of the local government debt limit replacement and hidden debt stock. In addition, it is necessary to supervise the monitoring and reform transformation of financing platform company debts. By strengthening the work connection with government departments and local people's congresses, enhancing investigations and studies, promoting further strengthening of government debt management, actively and prudently prevent and defuse debt risks, and promote sustained and healthy economic and social development.

Editor/Somer