Debt reform takes a lower priority to stabilizing growth
Recent policy directives from the Chinese authorities point toward a renewed emphasis on "stabilizing growth". The shift is broad, but the most straightforward implication is that the target of sheding debt pileup could become more elusive.
The latest signal of a priority shift came on May 25, when the National Development and Reform Commission loosened restrictions on bond issues by State-owned enterprises. Issues will not be subject to a quota as long as the proceeds are used to invest in "seven key sectors", which span a broad range of industries.
Analysts worry that this shift will give SOEs too much leeway to repackage their projects and sell them to the NDRC. Local government's off-balance sheet financing vehicles account for a majority of the issuers.
