Chinese commercial banks’ reticence to purchase local government debt in a new debt-for-bond swap plan has prompted the People’s Bank of China to speed up consideration of a mechanism that would allow the banks to swap the bonds they purchase for loans from the central bank, The Wall Street Journal reported, citing unnamed officials. The move, a variant of a similar strategy used in Europe’s bailouts, would aim to keep the country’s vital debt-restructuring program on track without causing a shortage of funds available for lending. The officials said the unorthodox strategy could be adopted within the next few months.
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