China’s Local Government Debt Swaps Roll On

Local governments issued a total of 32.5 billion yuan ($4.69 billion) worth of swap bonds in June and July, the first sales of 2019, as the Ministry of Finance extended a program to exchange expensive local authority debt into lower-cost bonds.

China’s three-year debt swap campaign was set to end in August 2018, with local governments shedding 14.34 trillion yuan of off-the-books debt, mostly short-term and high-interest, and changing it into bonds carrying lower interest rates. But with more than 315 billion yuan of hidden borrowings remaining as of the end of 2018, Premier Li Keqiang said in March that the program would continue in order to help reduce the burden of interest payments.