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More Securitization of State-Owned Enterprises to Come

China Securities reported that local governments may securitize state-owned enterprises in amounts up to 20.7 trillion yuan in their efforts to raise funds for local expenditures. In the past, local governments resorted to borrowing and the sale of government land in order to raise funds. The central government has recently made the local government’s debts a focus of attention. 

According to a statement that China’s Ministry of Finance made last week, in 2013, the proceeds from government land sales reached 4.1 trillion yuan, a 44 percent increase over 2012. Statistics released by the National Audit Office last month showed that, in 11 provinces, 316 cities, and 1,396 counties, the debts guaranteed by the sale of government land accounted for 37 percent of outstanding local government debts. 
The stated goal of some local governments is to securitize 40 percent of the enterprises that they own by the end of 2015. More provinces, particularly those with a large number of state-owned enterprises, are expected to push beyond 40 percent. Based on a 40 percent securitization rate and a 10 percent asset increase of state-owned enterprises, it is estimated that such securitization of state-owned enterprises will reach 20.7 trillion yuan by the end of 2015. 

Source: China Securities reprinted by Xinhua, January 30, 2014