中國創紀錄的6660億美元本地債務浪潮使外國人警惕

Yahoo Finance on 3 June 2020 reported the following:

Record $666 Billion China Local-Debt Wave Sees Foreigners Wary

Bloomberg Bloomberg News,Bloomberg 5 hours ago

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(Bloomberg) -- China’s success in luring foreigners into its domestic debt market, the world’s second largest, faces a new test in coming months as officials try to drum up interest in a record wave of bonds from local authorities.

 International funds now hold 8.6% of China’s central government bonds, several times more than the share just several years ago, and not terribly far from the 13% overseas stake in Japanese sovereigns. Inflows continued through the coronavirus crisis, and the U.S. trade war.

 Officials are hoping that interest might extend to local government notes, where foreign ownership is merely 0.01%. Issuance will climb to 4.73 trillion yuan ($666 billion) this year to help bolster economic growth that is expected to be the worst since the 1970s.

 “As China’s local government bond market is expanding quickly, regulators need to attract more diversified investors, including foreigners,” said Zhou Guannan, an analyst with Huachuang Securities Co. in Beijing. She said that would help “alleviate pressure on banks” -- which are usually dominant buyers, but are now burdened by mounting bad loans and requests to keep credit flowing to businesses.

Problem is, that legacy of bank purchases has left the local government bond market even less readily tradable than for central government bonds. That’s because the banks typically buy and hold -- making it more costly to exit a position should a foreign investor need.

 Plus, yields on these bonds generally don’t offer a premium over debt from so-called policy-banks -- lenders owned by the central government that often carry out Beijing’s policy objectives. Given such disadvantages, overseas investors have a negligible share of the 21 trillion yuan of local government debt outstanding as of the end of 2019, more than a fifth of the entire domestic market.

 Trading in the local bonds was just 5.3 trillion yuan in the first five months of the year, slightly more than a quarter of that in sovereign notes, where the total supply outstanding is 30% less.

 “We don’t buy local government bonds,” said Edmund Goh, Asia fixed-income investment director at Aberdeen Standard Investments in Shanghai. “The spread between local government bond and central government bond is too narrow, and the liquidity is bad.”

 Chinese regulators are aware of the problems, and are determined to build on the record of success getting fund managers abroad to see the attraction of diversifying into China’s debt.

 Efforts will be made to “improve the liquidity of local government bonds in the secondary market,” Xu Jinghua, an official with the Ministry of Finance’s treasury department, said at a briefing Friday, though she stopped short of spelling out specifics.

 Authorities will “steadily push forward the opening up” of the local debt market as they aim to “ensure smooth issuance” of government bonds this year, Xu said.

 At the end of the day, it could all come down to price.

 “I may consider buying some LGBs if they can provide spreads of 30 basis points over policy bank notes,” Goh said.

 Translation

 （彭博）-  中國要成功地在吸引外國人進入其全球第二大國內債務市場的過程中，面臨著新的考驗，因為官員們要嘗試提高人们對地方當局創紀錄的債券浪潮的興趣。

國際基金目前持有中國中央政府債券的8.6％，比幾年前的份額高出幾倍，與日本主權國家的13％的海外股份相差無幾。在冠狀病毒危機和美國貿易戰期間，資金仍持續流入。

 官員們希望買家興趣會擴大到地方政府債券，外國所有權现在僅佔0.01％。今年發行量將攀升至4.73萬億元人民幣（6660億美元），以幫助推動經濟增長，預計今年經濟將是1970年代以來最糟糕的。

華創證券有限公司駐北京的分析師週冠南說：“隨著中國地方政府債券(LGB)市場的快速擴張，監管機構需要吸引包括外國人在內的更多多元化投資者。”週說，這將有助於“減輕对銀行的壓力”，這些銀行通常是主要買家，但現在因不良貸款增加以及保持信貸流向企業的要求而承受著沉重負擔。

問題是, 因为債券以前是由銀行購買的, 它的後遺症使地方政府債券市場相比中央政府債券更加困難地去交易。那是因為銀行通常會進行購買和持有 - 如果需要外國投資者，退出持有的代價會較高。

 此外，对比來自所謂政策性銀行的債務, 這些地方債券的收益率通常不提供溢利。政策性銀行是中央政府所有的貸款人，通常執行北京的政策目標。鑑於這些不利因素，截至2019年底，在未償還的21萬億元政府債務中，海外投資者的份額微不足道, 而未償還的佔整個國內市場的五分之一以上。

 今年前頭五個月，地方債券交易額僅為5.3萬億元，略高於四分之一是主權債券，後者的未償還份額是低於總供應的30%。

 上海阿伯丁標準投資公司亞洲固定收益投資總監埃德蒙·高（Edmund Goh）說:“我們不購買地方政府債券”,“地方政府債券與中央政府債券之間的利差太窄，流動性差。”

 中國監管機構已經意識到了這些問題，並決心以成功的經驗為基礎，將國外基金經理引入，使他們看到多元化投資於中國債務的吸引力。

 財政部財政部官員徐靜華在周五的簡報會上說，將盡力“改善地方政府債券在二級市場上的流動性”，儘管她沒有透露具體細節。

 徐說，當局將“穩步推進本地債券市場的開放”，以期 “確保順利發行” 今年的政府債券。

 歸根結底，一切都以價格為依歸。

 埃德蒙·高(Goh)說： “我可能會考慮購買一些地方政府債券 (LGBs)，如果它們可以提供超過政策性銀行票據30個基點的價差。”

              So, it is the price that will determine how attractive the China’s local government bonds will be. It seems that China is very much in need of cash to help its economy.