As the "highlight" of a series of incremental policies this year, the package plan to resolve hidden debts of local governments was passed on the 8th, with unprecedented policy intensity in recent years. Analysts believe that this combination of debt and interest payments can not only reduce the financial pressure on local governments in the current period, but also enhance their ability and enthusiasm for economic development, while balancing risk prevention and development promotion. Policy "timely rain" On November 8, the 12th meeting of the 14th NPC Standing Committee voted to approve the resolution of the NPC Standing Committee on approving the Proposal of the State Council on Submitting to Review the Increase of Local Government Debt Limit to Replace Existing Implicit Debt. The long-awaited debt restructuring plan in the market has finally landed. This debt restructuring plan is a comprehensive and targeted policy "combination punch". If using numbers as keywords, it can be refined as "6 trillion+4 trillion+2 trillion". Namely: increase the local government debt limit by 6 trillion yuan to replace the existing implicit debt; Starting from 2024, for five consecutive years, 800 billion yuan will be allocated annually from newly added local government special bonds to supplement government funds, specifically for debt conversion, with a cumulative replaceable implicit debt of 4 trillion yuan; The implicit debt of 2 trillion yuan for shantytown renovation due in 2029 and beyond will still be repaid according to the original contract. This policy can be called a "timely rain". Currently, some places have large hidden debt scales and heavy interest burdens, which not only pose the risk of "explosion", but also consume available local financial resources. According to data from the Ministry of Finance, by the end of 2023, after project by project screening and hierarchical review and reporting, the national implicit debt balance will be 14.3 trillion yuan. With the coordinated efforts of the three policies mentioned above, the total amount of implicit debt that local governments need to digest will significantly decrease from 14.3 trillion yuan to 2.3 trillion yuan before 2028, and the average annual digestion amount will be reduced from 2.86 trillion yuan to 460 billion yuan, less than one sixth of the original amount. The pressure of debt repayment has been greatly reduced Finance Minister Lan Fo'an stated at a press conference on the 8th that "we have estimated that it is entirely possible for local governments to resolve the issue through their own efforts, and some places may even be relatively easy." The scale and intensity of the comprehensive debt reduction plan for risk prevention and development are rare in recent years, but it cannot be simply regarded as an economic stimulus measure. According to Luo Zhiheng, Chief Economist of Yuekai Securities, we should not only see the "largest scale effect" in recent years, but also the significant optimization of the fiscal bond strategy and the incentive effect on local government behavior. The large scale reflects the central government's determination to prevent and resolve risks, standardize debt management, and promote economic growth, which is conducive to boosting confidence and expectations In addition, he stated that the plan also reflects a significant optimization and adjustment of the work ideas for debt reduction, shifting from risk prevention as the main focus to better coordinating stable growth and risk prevention, and from "developing in debt reduction" to "developing in debt reduction". Due to the fact that the statutory debt interest rate is significantly lower than the implicit debt interest rate, the replacement will greatly save local interest expenses. According to the estimation of the Ministry of Finance, a total of about 600 billion yuan can be saved in five years. By reducing the financial pressure of local government debt and interest expenditures in the current period, local governments can free up more fiscal funds and energy to develop the economy, provide public services, better implement tax and fee reductions, and improve the business environment Luo Zhiheng stated. Looking ahead to the future: Policies and post recruitment. Various sectors of society are paying close attention to and looking forward to the direction and intensity of fiscal policies. Will there be any new fiscal increment policies in the future after this debt restructuring plan? Finance Minister Lan Fo'an stated at a press conference on the 8th that he is actively planning the next steps of fiscal policy and increasing efforts to counter cyclical adjustments. Specifically, the relevant tax policies supporting the healthy development of the real estate market have been approved according to procedures and will be launched soon. The issuance of special treasury bond to supplement the core tier one capital of large state-owned commercial banks is accelerating. The Ministry of Finance is cooperating with relevant departments to study and formulate policy rules to accelerate the implementation of special bonds to support the recovery of idle stock land, the addition of land reserves, and the acquisition of stock commercial housing for use as affordable housing. On November 11th, the Ministry of Natural Resources issued a notice on the use of local government special bond funds to recover and purchase idle land, supporting the revitalization of idle land. Chen Wenjing, Director of Policy Research at Zhongzhi Research Institute, stated that for the real estate market, reclaiming and acquiring idle land can help improve the supply-demand relationship and is a key measure to promote the stabilization of the real estate market. There is also hope for new actions in monetary policy. Wang Qing, Chief Macro Analyst of Dongfang Jincheng, stated that with the launch of implicit debt swaps, there will be a peak in government bond issuance in the first two months of the year. To support the issuance of local government bonds, it is expected that the central bank will use multiple channels to maintain reasonable and sufficient market liquidity in the future. He predicts that the central bank may further lower the reserve requirement ratio by 0.5 percentage points before the end of the year, releasing about 1 trillion yuan of long-term funds into the banking system. (New Society)