Beijing granting provinces permission to issue at least RMB2.6 trillion (US$419 billion) in bonds this year for the first time in decades recalls the public bailout of China’s state-owned banks in the 1990s and runs counter to its pledge to grant a greater role to market forces in the economy, The Wall Street Journal reported, citing financial analysts. “Banks will remain the biggest buyers of local government bonds, which means the risk will stay in the system,” said Terry Gao, a senior analyst at Fitch Ratings. Zhu Haibin, J.P. Morgan Chase & Co.’s chief China economist, called the debt swap “effectively a debt restructuring for banks.”
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