Henan province is planning to issue new a 10-year, RMB 52 billion ($7.1 billion) special-purpose bond (SPB) to swap off-the-books borrowings, signaling that Beijing may be expanding the methods local authorities can use to resolve their hidden debt, reports Caixin. “Outstanding debt” in this context refers to the outstanding local government hidden debt that had been recorded by the Ministry of Finance by 2018.
The purpose of the bond was disclosed in its ratings report published by the finance department of the provincial government on Wednesday. An official in the department confirmed to Caixin that the proceeds would be used for resolving “outstanding debt,” but the information has since been removed from the ratings report.
While certain types of local government bonds, such as special refinancing SPBs, can be used for resolving outstanding hidden debt — by swapping the off-budget borrowing for on-budget bonds — new SPBs have never been explicitly used for that end.