Topic: Finance

A continued contraction in commercial acceptances will be a drag on growth in H2.

Over the past six weeks, the market has been preoccupied with the question of whether the central government will honor Huarong’s debts, and whether foreign holders of Huarong’s dollar-denominated bonds will be required to take a haircut

A recent spate of bond defaults by state-owned enterprises (SOEs) has triggered market doubts about the reliability of the implicit government guarantees that have traditionally backed SOE bonds.

Special purpose bond (SPB) issuance has surged this year, but they have not been as effective a vehicle for stimulus as Beijing had hoped.

Over the past twelve months, the China Banking and Insurance Regulatory Commission (CBIRC) has twice cracked down on structured deposits. The second crackdown seems to have done the trick.

Chinese policymakers’ effort to transition away from monetary and credit-led stimulus toward direct on-budget fiscal channels to support the economy is hitting roadblocks. Fiscal expenditure so far this year has significantly lagged the target for 2020 set in the May budget, with central officials becoming increasingly vocal about the need to speed up spending.

Beijing has massively ramped up local government special purpose bond (SPB) issuance this year, but where the funds are going is unclear. We undertook a deep-dive analysis of local government SPBs to get a better sense of what is going on. Our research found that compared with previous years, there has been increased obfuscation in bond prospectuses as to where SPB funds will be spent.