As part of the NPC meetings, it was announced that the Chinese government will allow local governments to swap as much as CNY 1 trillion in high-yielding debt into government bonds. This represents about 54% of the debt that comes due in 2015. By allowing the debt swap, the Chinese government is permitting local governments to substantially reduce the interest paid on this debt. The interest savings could be as much as CNY 50 billion/year which would allow authorities to boost spending to support economic growth. It is also speculated that the swap would be accomplished by direct central bank purchases of local government debt, a form of quantitative easing (QE). The Chinese government has denied that this is QE but what is clear and a very positive development is that they are now ready to use proactive fiscal policies in conjunction with monetary policy to achieve their economic objectives.
CWB McLean & Partners is releasing our next Quarterly Outlook Commentary next month. This report reflects on significant investment headlines over the past quarter and the implications of these events to our portfolios. In addition, the report highlights some companies that we hold in our strategies on a national and international level, providing further insight into our theses on the holdings. To receive a copy of the report, please contact us at (403) 234-0005 or [email protected].