Last January, when I made my predictions for 2014, I wrote:
The biggest muniland story this year will be the development of the Chinese municipal bond market. It’s not often that you get to watch a government launch a bond market. And China’s will be massive. From the South China Morning Post:
The [Chinese] mainland’s quest to solve its $3 trillion-and-growing public debt problem by starting a domestic municipal bond market hinges on the one thing officials are most afraid of: transparency.
As markets absorb the results of the latest audit of state finances, Beijing’s long-standing vow to develop a municipal bond market to curtail rapid growth in other types of hidden public debt will take centre stage once more.
Now the Chinese State Council is poised to take the next step in approving guidelines that mean local governments will be allowed to issue debt. ECNS.com reports:
State Council would set quota system on debt, but only under strict conditions.
China may allow local governments to sell municipal bonds under narrow parameters in a move to regulate their borrowing and reduce systemic risk.