China launches new debt-swap quota for local govts

China today launched a one-trillion yuan (USD 161 billion) debt swap deal for the second time this year in a bid to boost the world's second largest economy and help local governments refinance their massive debt burdens.
The Ministry of Finance (MoF) launched a 1-trillion-yuan debt swap deal in March.
Two trillion yuan has been channeled into the deal, state-run Xinhua news agency reported.
The decision was based on results from the National Audit Office (NAO) in 2013 which found about 1.86 trillion yuan of local government debt would mature in 2015, according to a source with the MoF who declined to be named.

Qiao Baoyun, a professor with Beijing-based Central University of Finance and Economics, said that debt swaps can relieve local governments' burdens and balance the relationship between debt management and stable growth.
Bai Chong'en, a professor at Tsinghua University, said the swaps will not change the overall liquidity in the market.

China is struggling to rein in local government debt caused by unbridled borrowing during an investment and construction binge since the global financial crisis in 2009.
The NAO said that local government debt stood at around 10.9 trillion yuan by the end of June 2013.
The expected move highlights China's continued worries over its slowing economic growth and increasing debt.

China's local governments had run up 17.9 trillion yuan of debt as of mid-2013. The country's first-quarter year-on-year growth rate was 7 per cent, the slowest in six years.