Local debt risk basically achieved "soft landing"
Lin Chaohui, Huatai United Securities Co., Ltd This report uses the analytical framework established in the first report last year, and combines the latest data of the local government debt balance and its income status to make an updated assessment and prospect of the local debt risk status. In 2011, the balance of local government debt kept zero growth on the whole, and local fiscal revenue showed a higher than expected growth. At the same time, the revenue from the transfer of state-owned land use rights obtained by local governments also kept a rigid growth. Therefore, the financial situation of local governments showed a good situation of "controlling debt and increasing revenue". The relatively significant change of "debt control and revenue increase" last year restored the overall growth of local debt and local fiscal revenue to the same speed from 2003 to 2011, that is, since the new round of high growth cycle, local debt and local fiscal revenue have resumed matching growth. The financial leverage ratio of local governments, measured by the local debt balance/the three local comprehensive incomes, also accelerated to a historical safe range below 90% in 2011, so the risk of local debt has basically achieved a "soft landing". In 2012, local debt is still faced with constraints such as controlling new and old debts and slowing growth of local revenue. Under the background that the balance of local debt is expected to continue to maintain low growth this year, according to the expected growth level of local main incomes in this year's budget draft, it can be preliminarily estimated that the local debt leverage ratio at the end of this year will maintain or be better than the safety level reached at the end of last year, The corresponding debt risks will also be consolidated and resolved continuously.
