On 13th May 2024, the Financial Times published an article titled "China Fires Starting Gun on $140bn Debt Sale to Boost Economy," providing a comprehensive overview of the arrangements surrounding the issuance of China's ultra-long special government bonds. The article features an in-depth analysis by Mr. Zuo Yiming (Jameson Zuo), Director of CSPI Ratings, on the arrangements for the issuance of these ultra-long special government bonds.

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The bond sale “comes at a crucial time for China to reshape its debt structure”, said Jameson Zuo, a Hong Kong-based director at CSPI Credit Rating Co, referring to Beijing’s strategy of using more central government borrowing while trying to tackle the mountain of local government debt.

 “Compared to a global standard, China still has significant room, potentially trillions of yuan worth of bond issuance over the next five to 10 years, to let the central government take up more leverage and boost investments,” Zuo added.

Quoted from the article "China Fires Starting Gun on $140bn Debt Sale to Boost Economy" published by the Financial Times.

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Non-rating Action Commentary: China Is Reshaping Its Public Debt Structure

On 8th May 2024, CSPI Ratings published a credit commentary titled " China Is Reshaping Its Public Debt Structure". The main points are as follows:

- The future evolution of China's public sector debt will be guided by a strategic framework characterized by the active increase of debt by the central government (CG), appropriate expansion of direct debt by local governments (LGs), and rigorous approaches to control and resolve LG implicit debt.

- CG's utilization of ultra-long special bonds as a key mechanism for increasing leverage is projected to raise CG's debt ratio by approximately 5 percentage points in the long run.

- The overall fiscal equilibrium of LGs will be upheld while deficit and debt pressures persist.

- Resolving the short-term fiscal challenges and debt pressures of LGs necessitates a combination of augmenting revenue streams, reducing expenditures, and bolstering central transfer payments. However, the long-term solution lies in fundamental fiscal and tax system reforms.

- The prolonged strategic maneuvering between the central and local governments serves as the fundamental basis for debt resolution.

- The implementation of the "Package of Debt Resolution Schemes" has bolstered the government's accountability in managing general debt, receiving widespread recognition in the market as a confidence boost for LGFVs.

- As the strategic interactions between the central and local governments persist, the future landscape suggests that commercialized state-owned enterprises may emerge as the primary drivers of local leveraging efforts.

CSPI Ratings Spoke at HKIFA Seminar ：China Bond Market Development

On 9th May 2024, CSPI Ratings participated in a Hong Kong Investment Funds Association (HKIFA) seminar. Mr. Jameson Zuo, the Director of Ratings at CSPI Ratings, attended the seminar and delivered a theme speech entitled "China Is Reshaping Its Public Debt Structure".

The main points are as follows:

- Central Government Takes the Lead in Restructuring China's Public Debt Landscape

- The Local Government Direct Debt to Maintain Growth with Taxation Reform Being a Key to Improve Fiscal Sustainability

- Implicit Debt Resolution Alleviates LGFV Liquidity Risk with Strategic Maneuvering Between CG and LG to Continue

About CSPI Ratings

CSPI Ratings is an international credit rating agency based in Hong Kong, China. Licensed by the Hong Kong Securities and Futures Commission in 2012, CSPI Ratings combines world-class credit analysis with a unique perspective on the emerging world to provide globally benchmarked credit ratings and original credit research for global capital markets.

CSPI Ratings is a member of the China Securities Credit Investment Co., Ltd. (CSCI), a nationwide comprehensive credit service organization founded by 35 leading financial institutions in China. CSPI Ratings is an international brand wholly owned by CSCI Pengyuan, China's leading domestic credit rating agency. From 2012 to 2022, CSPI Ratings had operated under the well-known brand name " Pengyuan International".

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