China plans to complete a local government debt swap program worth 1 trillion yuan (164 billion U.S. dollars) by the end of August, Xinhua learned Wednesday.
To minimize the impact on liquidity an influx of local government bond offerings would have, the main issuance mode will be private placement rather than public offering, according to a document jointly released by the Ministry of Finance, the People's Bank of China (PBOC) and China Banking Regulatory Commission.
The local government bonds can not be directly traded in interbank or exchange markets, but repo trades are allowed. They are also included as a form of collateral for PBOC's liquidity tools such as the standing lending facility (SLF), mid-term lending facility (MLF) and pledged supplementary lending (PSL).
China is struggling to rein in local government debt caused by unbridled borrowing during the investment and construction binge since the global financial crisis in 2009.
The National Audit Office said that local government debt stood at around 10.9 trillion yuan by the end of June 2013. A total of 1.86 trillion yuan is due by the end of this year.
