BEIJING, Aug 20 (Reuters) – As policymakers try to shore up an increasingly volatile economic recovery and reassure worried investors, the People’s Bank of China said in a statement on Sunday that local governments announced that it will adjust financial assistance to solve the debt problem.
The statement comes after a joint meeting on Friday between China’s top financial regulator, the People’s Bank of China (PBOC) and its securities regulators, as China’s deepening real estate crisis spills over into its financial system. It was announced amid growing concerns that it was starting.
China unexpectedly cut several key rates early last week to boost economic activity and is expected to cut prime loan rates on Monday, but analysts say too few steps have been taken so far. It is too late and stronger measures are needed, he said. to stem the economic downward spiral.
The People’s Bank of China (PBOC) said in a statement that the financial sector should coordinate support for resolving local debt risks, enhance tools for preventing and resolving debt risks, strengthen risk monitoring, and implement policies to avoid systemic risks. should be held firmly.
The China Politburo, the ruling Communist Party’s top decision-making body, reiterated in late July its focus on preventing local government debt risks and said it would implement a series of measures, although plans have yet to be announced. do not have.
Bloomberg reported on Aug. 11 that China will provide local governments with bond issuance lines totaling 1 trillion yuan ($137 billion) to refinance.
Analysts believe a coordinated rescue will likely combine additional funding and refinancing routes, debt swaps and payment extensions, and the possibility of debt restructuring.
After years of overinvestment in infrastructure, plunging revenues from land sales and soaring COVID-19 containment costs, indebted municipalities pose a major risk to China’s economic and financial stability, economists say. points out.
A deep recession in the once-strong real estate sector has hurt the finances of many local governments and led to a growing number of developers defaulting on their debts.
But Fitch Ratings said earlier this month that the central government would offer sweeping bailouts to more troubled local governments to undermine years of efforts by policymakers to bring debt levels down to more manageable levels. said he expected to try to avoid
People’s Bank of China Governor Pan Gongsheng, State Financial Regulatory Authority Deputy Director Xiao Yuanqi, China Securities Regulatory Commission Vice Chairman Li Chao and other financial sector officials attended Friday’s meeting, which also offered loans to banks. asked to strengthen.
“Financial support to the real economy must be strong enough,” the statement said, adding that big banks needed to increase lending.
The People’s Bank of China (PBOC) also reiterated its commitment to optimizing credit policies for the real estate sector and strongly supporting SMEs, technological innovation and the manufacturing sector.
But analysts say many consumers and businesses are reluctant to spend or borrow more given the highly uncertain economic climate. New bank lending fell to its lowest level in 14 years in July.
(1 US Dollar = 7.2800 Chinese Yuan)
Reporting by Ellen Zhang, Siyi Liu, and Ryan Woo.Editing: Kim Coghill
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