REAL ESTATE BUBBLES
After soaring property prices made housing affordability and risks of real estate bubbles a growing concern, authorities have reiterated that "housing is for living in, not for speculation."
Since last year, dozens of local governments have passed or expanded restrictions on house purchases and increased minimum downpayments. Property developers, real estate agencies as well as Internet finance and micro-loan companies were prohibited from offering illicit downpayment financing for buyers.
The effort has paid off. Home-buying fever has cooled in hotspot cities, with both new and second-hand home prices in first-tier cities posting slower year-on-year growth for the 13th consecutive month in October.
Leverage in the real estate sector was reduced. In the first three quarters, medium- and long-term loans to residents, mainly individual property mortgage loans, accounted for 37.6 percent of all new loans, down from 45 percent last year, according to the central bank.
LOCAL GOVERNMENT DEBT
China's local government debt soared during an investment and construction binge following the global financial crisis in 2008. Well aware of the risks, authorities have taken an array of measures to reduce the local debt burden.
Debt ceilings have been set for local governments, a debt-for-bond swap program has been piloted to exchange higher-cost loans with lower-cost bonds, while steps were taken to move some local government fiscal liabilitiess to higher authorities.
This year, authorities tightened regulation on "backdoor" borrowing such as financing through fake public-private partnerships. The "front door" was also opened, with local governments allowed to issue land reserve bonds and toll road bonds to increase their funding capabilities through standardized transparent channels.
Outstanding local government debt stood at 15.86 trillion yuan (about 2.4 trillion U.S. dollars) as of June 30, slightly higher than 15.32 trillion yuan at the end of 2016 but below this year's government-targeted ceiling of 18.82 trillion yuan.
In an analysis earlier this month, Moody's said the economic and fiscal performance of Chinese local governments was stable in the first three quarters of 2017, expecting full-year targets to be met.
SOE LEVERAGE
Poor corporate governance, overcapacity and easy credit supply have pushed debt in China's state-owned enterprises (SOEs) to an alarming level in the past few years. Reducing SOE leverage was given high priority at the National Financial Work Conference, a five-yearly tone-setting meeting, in July.
More centrally-administered SOEs were merged and restructured this year, a mixed-ownership reform scheme was expanded steadily to introduce private capital, while debt-to-equity swaps were accelerated, allowing companies with long-term potential to exchange their debt for stocks.
These moves improved corporate governance and efficiency, with SOE profits posting double-digit growth so far this year. By the end of September, the average debt ratio of central SOEs fell 0.2 percentage points from the beginning of the year.
However, more still needs to be done. Li Yang, chairman of the National Institution for Finance and Development and a renowned economist, estimated that the SOE deleveraging process would likely take three to five years.
"The key of SOE deleveraging is the disposal of 'zombie firms,'" he said.
