Core Insights - The issuance of local government special bonds and replacement bonds will commence on January 5, 2026, with Shandong Province planning to issue 24.609 billion yuan for refinancing existing hidden debts [1] - A total of 6 trillion yuan in replacement bonds is expected to be fully issued, marking a significant phase in the replacement of hidden debts, although local debt management efforts will continue [1][2] - The focus of local debt management is shifting from debt replacement to establishing long-term mechanisms, with an emphasis on the market-oriented transformation of local government financing platforms [3] Group 1: Debt Replacement and Management - The issuance of 2 trillion yuan in replacement bonds, along with special local government bonds for debt management, will alleviate the immediate debt pressure on local governments and reduce interest expenses, potentially saving around 400 billion yuan in interest payments [2] - Experts suggest that the local debt management strategy will transition from primarily replacing debts to building sustainable mechanisms, with a target to eliminate hidden debts by 2028 [3] - The central economic work conference has called for optimizing debt restructuring and replacement methods to mitigate risks associated with operational debts of local government financing platforms [4] Group 2: Market Transformation of Financing Platforms - The reform and transformation of local government financing platforms (城投公司) have accelerated, with 362 companies publicly announcing their exit from government financing roles as of December 30, 2025 [4] - The key to managing operational debts lies in the "exit from the list" process, which will determine whether the remaining financial debts of these companies will still be classified as operational debts [4] - Future debt management will rely heavily on special bonds, with the Ministry of Finance allocating 800 billion yuan annually from new local government special bonds for debt management until 2028 [3] Group 3: Risk Prevention and Control - The establishment of a dedicated Debt Management Department within the Ministry of Finance aims to centralize the management of government debts, enhancing coordination and resource allocation [7] - The department will focus on preventing and mitigating hidden debt risks, addressing issues such as underreporting and illegal activities related to hidden debts [7] - The goal is to create a comprehensive debt risk prevention system that ensures the rational use of government debt funds while avoiding systemic risks [7]

Report's Industry Investment Rating - Not provided in the content Core Viewpoints of the Report - Since 2024, with the rapid implementation of debt - resolution policies, Sichuan Province has achieved orderly resolution of implicit debts, a continuous decrease in the number of financing platforms, and optimization of the debt structure of urban investment companies. However, there are still some pressures on debt repayment and liquidity in some regions. The financial fundamentals of urban investment companies are difficult to improve significantly. In the future, the resolution of operating debts depends on the substantial transformation of urban investment companies and the enhancement of their self - hematopoietic ability to achieve a new balance between economic development and debt resolution [3][5]. Summary of Each Section I. Sichuan Province's Debt Management Situation - **Overall situation**: Since 2024, with the rapid implementation of debt - resolution policies, the number of local government financing platforms in Sichuan has been significantly reduced. The province has taken various measures to resolve implicit debts, and the debt - repayment pressure has been relieved to some extent. For example, in 2024, Sichuan issued 5079.2 billion yuan of local government bonds, of which 1982 billion yuan was used to replace existing debts [5][6]. - **City - level situation**: Different cities in Sichuan have different debt management measures and effects. For example, Chengdu issued 473.3 billion yuan of refinancing special bonds to replace existing implicit debts; Mianyang used 171.96 billion yuan of refinancing special bonds (issued in three years from 2024 - 2026) to replace existing implicit debts; Yibin established a risk - prevention and control mechanism and completed the annual debt - resolution task [6]. II. Changes in Financial Indicators of Urban Investment Companies Investment - **Overall in Sichuan**: From 2022 to June 2025, the scale of the three types of investments (urban - construction assets, self - operated assets, equity, and fund - investment assets) of urban investment companies in Sichuan increased year by year, but the growth rates declined. The proportion of urban - construction assets decreased, while the proportion of equity and fund - investment assets increased. In 2024, the growth rate of urban - construction assets, equity and fund - investment assets, and self - operated assets decreased to 5.56%, 18.23%, and 3.53% respectively from 15.32%, 26.00%, and 13.30% in 2022 [10][11]. - **Regional differences**: In 2024, the total asset scale of enterprises in Chengdu was much larger than that in other cities. The growth rates of the three types of investments in Yibin, Nanchong, Ya'an, and Leshan were relatively high, while the investment scale in Dazhou and Panzhihua decreased [12][13]. Receivables - **Overall in Sichuan**: From 2022 to the end of 2024, the accounts - receivable scale of urban investment companies in Sichuan continued to expand, but the growth rate slowed down. The cash - income ratio remained at a relatively high level [14]. - **Regional differences**: At the end of 2024, the accounts - receivable scale of urban investment companies in Chengdu accounted for more than half of the province, and the collection pressure needed to be relieved. The growth rates of accounts - receivable in Meishan, Bazhong, and Yibin were relatively fast, while those in Dazhou, Luzhou, Panzhihua, and Ya'an decreased. The cash - income ratios in Nanchong and Panzhihua were high, while those in Guang'an, Chengdu, and Yibin were relatively low [15][17]. Fundraising - **Overall in Sichuan**: From 2022 to 2024, the net cash inflow from fundraising activities of urban investment companies in Sichuan decreased year by year. In 2024, except for Ya'an, Dazhou, and Luzhou, the fundraising activities of urban investment companies in other cities had net cash inflows, and the net inflow scale of most cities decreased year - on - year [18]. - **Regional differences**: In 2024, the cash inflow and outflow of fundraising activities of urban investment companies in Chengdu accounted for more than 60% of the province. The fundraising activities of different cities varied significantly. The net cash inflow of fundraising activities in Yibin was relatively large [18]. Interest - bearing Debt - **Overall in Sichuan**: From 2022 to June 2025, the debt scale of urban investment companies in Sichuan continued to grow, but the growth rate slowed down. The debt - term structure was mainly long - term debt. After the implementation of the "package debt - resolution plan", bank - loan financing increased, and the proportion of bond and other financing decreased [20][21]. - **Regional differences**: At the end of 2024, the debt scale of Chengdu accounted for nearly 70% of the province. The debt - growth rates in Meishan, Zigong, Ziyang, and Yibin were relatively fast. The proportion of short - term debt in some regions was relatively high. The bank - financing growth rates in Yibin, Guang'an, and Zigong were relatively high in 2024, and most cities' bond financing showed a net outflow [20][23]. Debt - repayment Ability - **Overall in Sichuan**: From 2022 to June 2025, the asset - liability ratio and total - debt capitalization ratio of urban investment companies in Sichuan increased year by year. The cash - to - short - term - debt ratio decreased from 2022 to the end of 2024 and rebounded significantly at the end of June 2025 [25][26]. - **Regional differences**: The debt burdens of urban investment companies in Mianyang, Chengdu, Guangyuan, and Yibin were relatively heavy, while those in Ya'an, Guang'an, and Liangshan were relatively light. The short - term debt - repayment pressures in Zigong, Suining, Leshan, and Yibin were relatively large, while those in Chengdu and Guang'an were relatively small [26]. III. Summary - Since 2024, through debt monetization and market - oriented transformation, the investment growth rate of urban investment companies in Sichuan has gradually slowed down, and the investment structure has been continuously adjusted. The debt scale has continued to grow, but the growth rate has slowed down. The proportion of bank financing has increased year by year. However, the overall debt burden of urban investment companies in Sichuan has continued to increase, and regional differences are obvious. In the context of large fiscal revenue and expenditure pressures, it is still difficult to significantly improve the financial fundamentals of urban investment companies [28].

Core Viewpoint - The successful issuance of bonds by urban investment companies (城投公司) on exchanges signifies a critical step towards transforming from traditional financing platforms to market-oriented entities, enhancing their financing channels, governance structures, and credit transparency, akin to the status of listed companies [7] Financing Function Upgrade - Urban investment companies have shifted from relying on indirect financing methods, such as bank loans and trusts, to direct financing through bond issuance on exchanges, allowing for larger financing scales, longer terms (5-10 years), and potentially lower costs [1] Market Recognition and Credit Endorsement - Successful bond issuance requires passing strict processes including exchange review and credit rating, which demonstrates the company's debt repayment ability and asset quality, thereby enhancing its creditworthiness in the capital market [2] Governance and Transparency Requirements - To meet exchange regulatory requirements, urban investment companies must improve their governance structures, financial systems, and information disclosure, similar to the standards required of listed companies [3] Expanded Capital Operation Space - Following successful bond issuance, urban investment companies can diversify their financing tools, such as convertible bonds and green bonds, enhancing their flexibility in capital operations [4] Brand Effect and Market Position Enhancement - High-rated bond issuance can elevate the influence of urban investment companies within their regions, attracting more investors and potentially establishing them as benchmarks for local government financing [5] Notable Differences - The fundamental difference between equity and debt financing is highlighted, as urban investment companies engage in debt financing, which requires regular principal and interest repayments without diluting equity [6] - Regulatory oversight differs, with listed companies under the supervision of the securities regulatory commission, while bond-issuing urban investment companies are primarily regulated by exchanges and other governmental bodies [6]

Core Viewpoint - The establishment of a high-quality government debt management mechanism and a comprehensive local debt monitoring and regulatory system is crucial for balancing development and risk prevention during the "14th Five-Year Plan" period [1][2]. Group 1: Local Government Debt Growth - Local government debt has rapidly increased from approximately 25.7 trillion yuan at the end of 2020 to an estimated 51.3 trillion yuan by May 2025, representing a doubling of the debt [1]. - The total local debt is currently within the limit of 57.9 trillion yuan, indicating that the overall risk is manageable [1]. - The significant increase in local debt during the "14th Five-Year Plan" is attributed to the need for economic stability in response to the pandemic and other macroeconomic changes [4][8]. Group 2: Mechanisms for Debt Management - The "14th Five-Year Plan" has seen a shift towards a more transparent management of all debts, moving from dual-track management of hidden and legal debts to a unified approach [1][4]. - The issuance of special bonds has surged, with the annual issuance during the "14th Five-Year Plan" period averaging around 4 trillion yuan, aimed at supporting infrastructure and housing projects [9][10]. - The central government has implemented a comprehensive debt reduction policy, with an estimated 12 trillion yuan allocated to mitigate existing hidden debts [9][15]. Group 3: Regulatory Framework and Challenges - The regulatory framework for local government financing has improved, with measures such as dynamic management of high-risk areas and enhanced transparency in debt monitoring [11][15]. - Despite progress, challenges remain, including the potential for new hidden debts and inflated revenue projections for special bond projects [16][17]. - The need for a balance between debt sustainability and fiscal space is emphasized, particularly as interest payments on debts increase [16][21]. Group 4: Future Considerations for the "15th Five-Year Plan" - The focus for the "15th Five-Year Plan" will be on enhancing the quality of debt management and ensuring that debt financing aligns with high-quality development goals [2][21]. - There is a call for a more refined evaluation system for the entire lifecycle of projects funded by debt to ensure accountability and effectiveness [16]. - The transformation of local financing platforms into market-oriented entities is necessary to reduce reliance on government credit and enhance operational efficiency [20][21].

Core Insights - Moody's upgraded the international rating of Henan Airport Investment Group from Baa1 negative to Baa1 stable, reflecting recognition of the group's high-quality development and positive growth prospects [1] Macro Dynamics - In the first four months of 2025, the Ministry of Finance reported that a total of 14,927 billion yuan in new local government bonds were issued, including 3,023 billion yuan in general bonds and 11,904 billion yuan in special bonds [3] - As of the end of April 2025, the total local government debt balance reached 506,931 billion yuan, with general debt at 170,692 billion yuan and special debt at 336,239 billion yuan [3] Regional Highlights - Shaanxi Province is conducting special audits on financing platforms to reveal issues in hidden debt prevention and financing platform transformation [4] - Hainan Province is supporting eligible urban renewal projects to apply for new local government special bonds, with financial assistance for cities that increase land transfer revenue by over 10% compared to 2024 [6] Issuance Dynamics - Gongyi City plans to issue 1 billion yuan in medium-term notes for new urban construction [7] - Nanyang City Investment Holdings has received approval to issue 1 billion yuan in corporate bonds [7] - Zhengzhou Economic Development Investment completed the issuance of 700 million yuan in corporate bonds at a rate of 2.27% [7] - The Ministry of Finance plans to issue 68 billion yuan in government bonds in Hong Kong throughout 2025 [7] - The first knowledge property ABS in China was successfully issued with a rate of 2.15% [7] Debt Market Entities - Yichuan Caiyuan Industrial Investment announced the transfer of equity in five companies to Yichuan Ecological Technology City Investment to optimize resource allocation [8] - Lhasa City Investment completed its first non-standard debt replacement business with China Minsheng Bank [9] - Kaifeng Xiangfu District Development Investment has exited the government financing platform to operate as a market-oriented entity [10] Debt Market Sentiment - The Shenzhen Stock Exchange terminated the review of Jiangsu Hushuguan Investment Holding Group's 516 million yuan private bond project [11] - The Shanghai Stock Exchange terminated the review of Zoucheng Hengtai Holding Group's 800 million yuan private bond project [12] Market Perspectives - Dongwu Securities identified three characteristics of city investment companies issuing technology innovation bonds, including higher platform qualification thresholds, specific business requirements, and lower reliance on local government [14] - City investment companies meeting these criteria can leverage technology innovation bonds to invest in high-tech industries by June 2027 [15]