China will directly increase local debt reduction resources by 10 trillion yuan to significantly lower the total amount of hidden debts for local governments. Many institutions believe that the implementation of the debt reduction plan may further support the strength of the A-shares, with entities related to debt reduction expected to benefit directly.

Relevant officials from the Central Financial and Economic Affairs Office stated that borrowing government debt for public expenditure, especially capital expenditure, is a common practice under market economy conditions, which is beneficial for making good use of social savings, expanding domestic demand, enhancing public service capabilities, and promoting economic development.

Currently, China's government debt ratio is around 70%, which is relatively low on an international scale. The majority of China's government debt comprises domestic debt, most of which has formed effective assets, and there are many other assets and resources that can be revitalized, making the government debt risk overall controllable.

There needs to be development in debt reduction and debt reduction in development, effectively preventing and resolving local government debt risks.

Guotai Junan's Fixed Income Research Reports point out that long-term, high-grade perpetual bonds will exhibit the "core asset" logic. Attention should be paid to the structural opportunities of city investment bonds in regions benefiting from debt reduction within three years.

The large issuance of central enterprise industrial bonds still has room for yield curve compression. Fiscal debt reduction can significantly improve the cash flow statement of local governments.

The financialization of debt relies on the financial resources of different regions, the resource coordination capabilities of governments at various levels, and the asset quality of urban investment platforms.

Under the background of urban investment platform withdrawal and transformation, there may be differentiation in medium and long-term investment logic. Since the implementation of the fiscal debt policy, the performance of urban investment bonds (AA-) with maturities of 3 years and 5 years has shown differentiation, indicating that there are still divergences in market investment logic for mid to low-grade urban investment bonds after the withdrawal of platforms.

According to Zhito Finance APP, Tianfeng has released Research Reports stating that China has experienced three rounds of large-scale debt resolution actions: the first round from 2015 to 2017, the second round from 2018 to 2019, and the third round since 2023 known as the 'package debt resolution plan.'

In the first two rounds, the debt expansion rhythm of the Eco-friendly Concept industry was closely linked to the rise and fall of PPP mode.

At this point in time, the pressure on accounts receivable has become a significant reason dragging down the financial reports of the Eco-friendly Concept industry. The current '6+4+2' debt resolution combination plan is quite substantial and is expected to have a positive impact on the public environmental protection industry.

Relevant Hong Kong stocks in the Eco-friendly Concept industry:

Dongjiang Environmental (00895): Dongjiang Environmental is a large group company focused on the resource utilization and harmless treatment of industrial and municipal waste, as well as the recovery of rare and precious metals, alongside the collaborative development of water governance, environmental engineering, and environmental monitoring. Currently, Dongjiang Environmental holds licenses for 44 types of hazardous waste operations, with an annual hazardous waste disposal capacity exceeding 2.8 million tons. The company has 60 units under its headquarters, and its business network covers core areas in the hazardous waste industry such as the CNI Zhujiang Index, CNI Yangtze Index, JING-JIN-JI, the Yangtze River Economic Belt, and markets in the central and western regions of China, serving over 25,000 clients.

BJ ENT WATER (00371): HAITONG SEC believes that with the continuous advancement of debt resolution policies, the current collection issue is expected to improve effectively. This will not only reduce the decline in profit margins caused by credit impairment losses on the income statement, but will also further improve the cash flow in the Sector, maintaining a high dividend payout ratio in water affairs and addressing the original high dividend logic flaws, thus further driving the Sector's valuation. Soochow pointed out that the initial concerns about collections have led to downward valuation in water and solid waste sectors, and following the resolution of payment pain points through debt resolution and market-oriented reforms, a value recovery is anticipated.