Beijing okays second batch of debt swaps, doubling size to 2 trillion yuan

Shanghai

CHINA'S finance ministry said on Wednesday it has approved a second batch of local government debt swaps worth one trillion yuan (S$216 billion), doubling the size of the existing swap programme announced in March.

As growth has slowed in 2015, Beijing has been walking a fine line, trying to simultaneously rationalise often inefficient local government spending without damaging growth and investment too much. The result has been a sometimes seemingly contradictory fiscal policy mix.

Recent directives have both propped up the newly minted official municipal bond market - a cornerstone of the fiscal reform agenda - while also easing restrictions on off-balance sheet "local government financing vehicles" (LGFVs), though these had been a focus of a larger crackdown on shadow financing beginning in…