Matthews Asia: China's Loans-To-Bonds Swap Program

China’s Loans-To-Bonds Swap Program by Andy Rothman, Matthews Asia China has begun a program designed to clarify the size of its local government debt burden and reduce its financing costs. Swapping cheaper bonds for more expensive loans is an important step toward creating a healthier fiscal system. But it is equally important to understand what this program will not do. It isn’t a bailout, it won’t lead to local government defaults and it isn’t a Chinese version of quantitative easing (QE). How the Debt Built Up The accumulation of local government debt was the result of three policy choices made…