1. Core Views - The Central Economic Work Conference emphasized addressing local fiscal difficulties, with a focus on the "three guarantees" at the grass - roots level. It was proposed to maintain a deficit rate above 4% in 2026, with a general fiscal expenditure scale of about 15 trillion yuan. The management of local government special bonds was optimized, and the operational debts of financing platforms became the focus of debt resolution [6][9][11]. - Jilin Province announced that it had reached the standard to exit the list of key provinces for local debt. Liaoning Province aimed to build a closed - loop debt management system to promote effective debt resolution [15][16]. - This week, 8 urban investment companies declared themselves as market - oriented operating entities or exited the financing platform list. 25 urban investment companies prepaid bond principal and interest, and 1 urban investment bond was cancelled for issuance [18][22][23]. 2. News Comment Central Economic Work Conference - First, it was the first time to mention "addressing local fiscal difficulties" and ensuring the "three guarantees" at the grass - roots level. The contradiction between revenue reduction and expenditure increase was prominent, especially at the grass - roots level. It was necessary to increase transfer payments from the central government, optimize the transfer payment structure, and enhance local independent financial resources [9]. - Second, the positive fiscal policy was continued, with a focus on both total force and structural optimization. It was recommended that the deficit rate in 2026 be maintained above 4%, the general fiscal expenditure scale be about 15 trillion yuan, and the total scale of new government debt be increased to 14.8 - 15.5 trillion yuan. The structure of fiscal expenditure should be optimized [10][11]. - Third, the management of the use of local government special bonds was optimized, and the efficiency and quality of the "negative list" management were improved. Attention should be paid to the quality and comprehensive benefits of investment [12]. - Fourth, the operational debts of financing platforms became the focus of debt resolution. It was necessary to classify and handle debts, optimize debt restructuring and replacement methods, and establish a risk - sharing mechanism [13][14]. Jilin and Liaoning's Debt Management - Jilin Province announced reaching the standard to exit the list of key provinces for local debt, aiming to build a long - term government debt management mechanism and promote state - owned enterprise reform [15]. - Liaoning Province aimed to build a closed - loop debt management system, accelerate the resolution of implicit debts and the reform and transformation of financing platforms, and strictly prevent the increase of implicit debts [16]. Urban Investment Companies' "Exit from Platform" - This week, 8 urban investment companies declared themselves as market - oriented operating entities or exited the financing platform list. Since October 2023, a total of 963 companies have made such declarations, mainly in eastern provinces, with AA + as the main credit rating [18]. Prepayment and Cancellation of Urban Investment Bonds - 25 urban investment companies prepaid bond principal and interest this week, involving 26 bonds with a total scale of 31.57 billion yuan. One urban investment bond, "25 Chuanfa MTN003 (Hybrid Science and Technology Innovation Bond)", was cancelled for issuance, with a planned issuance scale of 1 billion yuan [22][23]. 3. Bond Issuance Local Government Bonds - This week, the issuance and net financing scale of local government bonds increased. The special refinancing bonds for replacing implicit debts in 2025 have been fully issued. As of December 14, the cumulative issuance of new bonds reached 5296.432 billion yuan, completing 101.85% of the annual quota. The weighted average issuance term was 12.52 years, and the weighted average issuance rate was 2.08% [24][25][26]. Urban Investment Bonds - This week, the issuance scale of urban investment bonds decreased, while the net financing scale increased. The issuance rate and spread both increased. The overall issuance rate was 2.28%, and the issuance spread was 77.64BP. The issuance was mainly private placement bonds, with a 5 - year term as the main one, and the issuer's main credit rating was AA + [35]. 4. Bond Trading Fund Situation - This week, the central bank conducted 668.5 billion yuan of reverse repurchase operations in the open market, with 663.8 billion yuan of reverse repurchases maturing, resulting in a net investment of 4.7 billion yuan. Short - term capital interest rates mostly increased [39]. Bond Trading - The trading scale of local government bonds decreased by 2.40% to 496.486 billion yuan, and the trading scale of urban investment bonds increased by 16.79% to 316.22 billion yuan. The credit spreads of 1 - year, 3 - year, and 5 - year AA + urban investment bonds narrowed [41]. Abnormal Trading of Urban Investment Bonds - This week, 12 urban investment entities had 12 abnormal bond transactions. The number of entities, bonds, and abnormal transactions increased compared with last week [41]. 5. Important Announcements of Urban Investment Companies - This week, 76 urban investment companies announced changes in senior management, legal representatives, directors, supervisors, etc., changes in controlling shareholders and actual controllers, equity/asset transfers, and cumulative new borrowings [44].

Report Industry Investment Rating No information provided in the report. Core Viewpoints - The clearance of financing platforms is an important measure to resolve local debt risks, aiming to achieve sustainable development of the local economy and state - owned enterprises. It involves the separation of government financing functions, decoupling of government credit, and structural adjustment of the government - enterprise relationship. - In the short term, the overall credit quality of financing platforms will not decline significantly, but attention should be paid to the differentiation of credit risks. In the long term, the credit risk level of financing platforms after clearance depends more on their own cash flow and solvency, which are greatly affected by the process and effect of their market - oriented transformation. [3][20] Summary by Directory Introduction - Local financing platforms have contributed to China's local economic development and urbanization, but with the end of the urbanization process, the increasing debt burden of local governments, and the decreasing marginal benefit of investment, it is urgent to resolve local debt risks. - As of the end of 2024, China's government debt balance was 92.6 trillion yuan, with a government debt - to - GDP ratio of 68.7%, which is in a reasonable range and the debt risk is controllable. However, there are prominent structural and liquidity problems in government debt, and the debt of financing platforms is also an important source of local debt risks. [5][6] Necessity of Financing Platform Clearance Essence of Financing Platform Clearance - The formation of financing platform debt risks is due to factors such as the mismatch of local government's powers and financial resources, the expansion of infrastructure investment, and the high dependence on land finance. - The central government has introduced a series of policies to regulate financing platforms, and financing platform clearance involves not only formal "exiting the platform" and "zeroing out implicit debt" but also deeper - level reforms. [7][10][13] Purpose of Financing Platform Clearance - It is a necessary measure to support the high - quality development of the real economy, helping to release the inefficient occupation of financial resources and promote the transformation of the economic development model. - It is a basic requirement to adapt to the transformation of the urbanization development stage, as the historical mission of financing platforms is basically completed. - It is a direct means to close the back - door financing channels of local governments, curbing the disorderly expansion of local debt. - It is a prerequisite for enhancing the market competitiveness of local state - owned enterprises, forcing them to pursue market - oriented development. [14][15][16] Connotation of "Powerful, Orderly, and Effective" Promotion of Financing Platform Clearance - Powerful means having a firm attitude in implementing debt - resolution policies and strengthening the cleaning and standardization of financing platforms. - Orderly means arranging the clearance rhythm reasonably to avoid new risks during the process. - Effective means achieving the expected short - term, medium - term, and long - term effects, such as functional transformation, relationship adjustment, and the growth of high - quality state - owned enterprises. [17][18][19] Credit Risk Changes after Financing Platform Clearance Changes in Government - Enterprise Relationship, Functional Positioning, and Main Business - After clearance, financing platforms will be divided into three categories: transforming into market - oriented operating entities, retaining public - welfare functions, and liquidating and exiting. - In the short term, the relationship between financing platforms and local governments remains close, but in the long term, it will gradually weaken. - The functional positioning of financing platforms will change from urban investment and construction to urban comprehensive operation and regional industrial cultivation. - The business operations of financing platforms will gradually shift to market - oriented businesses, and they need to develop core competitiveness based on regional resource endowments. [21][22][23] Credit Risk Changes - In the short term, the overall credit quality of financing platforms will not decline significantly, but there is a differentiation of credit risks among different regions and platforms. - In the long term, the credit risk of financing platforms depends on their market - oriented transformation, and platforms in economically underdeveloped regions may face difficulties in refinancing and debt repayment. [24][25][26] Issues to be Noted - There are still few successful transformation cases of financing platforms, and "true clearance" requires the separation of historical debts, integration of operating resources, innovation of mechanisms and systems, and guarantee of reasonable financing needs. - Attention should be paid to issues such as the integration of operating resources, innovation of mechanisms and systems, and the guarantee of reasonable financing needs. In the second half of the ten - year debt - resolution period, the difficulty of resolving implicit debts and clearing financing platforms increases, and various forms of false clearance should be prevented. [27][28] Summary - To fundamentally prevent and resolve local debt risks, it is necessary to change the economic development concept, accelerate the reform of the fiscal and taxation system, and establish a long - term mechanism for local debt risk management. - The clearance of financing platforms is an important measure to resolve local debt risks and a key to deepening state - owned enterprise reform and stimulating the endogenous power of the local economy. [29][30]

Core Viewpoint - The article discusses the challenges faced by local governments in fully exiting their reliance on financing platforms, despite progress in reducing hidden debts and the implementation of regulatory measures [2][5][18]. Summary by Sections Financing Platform Exit Progress - As of mid-2025, local governments are required to eliminate financing platforms and hidden debts by June 2027, with significant progress already made, including over 60% of financing platforms having exited [3][7]. - The Ministry of Finance reported a reduction of over 7,000 financing platforms, indicating a substantial effort to address hidden debts [7]. Challenges in Debt Management - The most significant challenge in the exit process is finding incremental funding to repay existing debts, as previous policies have not fully covered the risks associated with hidden debts [4][10]. - Local governments are increasingly dependent on financing platforms to meet rigid expenditure needs, shifting from infrastructure funding to covering essential expenditures [18]. Debt Transformation Strategies - Local governments are exploring debt transformation strategies, converting hidden debts into operational debts, which requires convincing creditors to accept these changes [11][12]. - Various methods for debt resolution include fiscal debt management, financial restructuring, and asset utilization to generate revenue for debt repayment [15][16]. Regulatory Environment and Future Outlook - The central government emphasizes the need for a thorough separation of financing functions from local governments to prevent the re-emergence of hidden debts [19][20]. - There is a call for clearer guidelines from the central government to assist local finance departments in managing debt effectively and preventing future hidden debt accumulation [20].

Core Viewpoint - The article discusses the challenges faced by local governments in fully exiting their reliance on financing platforms, despite progress in reducing the number of such platforms and addressing hidden debts [1][15]. Summary by Sections Financing Platform Exit Progress - By mid-2025, over 60% of financing platforms had exited, indicating that more than 60% of hidden debts had been cleared [6]. - The central government has set a deadline of June 2027 for local governments to eliminate hidden debts and financing platforms [2][3]. Challenges in Debt Management - Local governments are struggling to find incremental funding to repay hidden debts, as traditional methods like "borrowing new to repay old" are becoming unsustainable [3][9]. - The reliance on financing platforms has shifted from funding infrastructure projects to covering rigid expenditures like basic livelihood guarantees [15]. Debt Transformation Strategies - A strategy called "debt transformation" is being explored, which involves converting hidden debts into operational debts, but this requires convincing creditors to agree to such changes [10][11]. - Various methods for debt resolution include fiscal debt management, financial debt management through market mechanisms, and asset resource revitalization [12]. Regulatory and Policy Framework - The central government emphasizes the need for a thorough separation of government financing functions from financing platforms to prevent the re-emergence of hidden debts [17]. - Recent reports indicate that some local governments are still accumulating hidden debts, highlighting ongoing compliance issues [15][16]. Future Outlook - The article suggests that the success of financing platform exits will depend on balancing local government responsibilities and financial capabilities [3][15]. - There is a call for clearer guidelines from the central government on managing hidden debts and defining the boundaries of asset resource utilization [17].

Group 1 - The core viewpoint emphasizes the importance of preventing and mitigating financial risks in key areas, ensuring that systemic financial risks do not occur [1] - The report highlights the need to strengthen monitoring and assessment of systemic financial risks [1] - Continued support for the market-oriented transformation of financing platforms is essential [1] Group 2 - Ongoing reforms and risk mitigation efforts for small and medium-sized financial institutions are necessary [1] - Establishing a responsibility mechanism that aligns incentives and constraints for risk disposal is crucial [1] - The report aims to build a robust financial safety net [1]

Core Viewpoint - The prevention and resolution of local government debt risks is a strategic task crucial to overall development, with significant progress made in the implementation of debt replacement policies since 2025, optimizing the debt structure and enhancing fiscal sustainability for high-quality economic development [1][2]. Group 1: Debt Replacement Progress - As of September 26, 2025, approximately 1.986 trillion yuan of the 2 trillion yuan debt replacement bond quota has been issued, achieving over 99% of the annual target [1][2]. - The issuance of "replacement hidden debt special bonds" has seen a notable extension in maturity, with over 700 billion yuan in 30-year bonds issued, and bonds with maturities over 10 years accounting for over 70% of the total [2][4]. - Regions such as Henan and Hubei have remaining quotas of 76.1849 billion yuan and 62.2886 billion yuan respectively, indicating a targeted approach to debt management [2][3]. Group 2: Policy Implementation and Management - The precise allocation of debt replacement resources is a key feature of the current replacement efforts, with the Ministry of Finance guiding localities in formulating bond issuance plans and managing the entire process [4][5]. - The replacement policies have begun to show effects across multiple dimensions, significantly reducing interest expenses and repayment pressures by replacing high-interest, short-term hidden debts with low-interest local government bonds [4][5]. Group 3: Long-term Mechanism and Fiscal Sustainability - The focus of debt management has shifted from emergency responses to a dual emphasis on regular prevention and the establishment of long-term mechanisms, enhancing fiscal sustainability [6][8]. - The Ministry of Finance has indicated plans to continue implementing a series of debt reduction measures, allowing local governments to access funds earlier to repay hidden debts and stabilize market expectations [6][7]. - A performance management system is being proposed to ensure the efficient use of debt funds, emphasizing the need for a shift from quantity management to quality improvement in debt utilization [7][8].

Core Insights - The process of clearing local government hidden debts is accelerating, with many regions aiming to achieve "zero hidden debt" by the end of the year [1][2][3] - A total of 82 districts and counties across the country have already achieved the goal of clearing hidden debts [2][3] - The Ministry of Finance reported that over 60% of financing platforms have exited, indicating significant progress in the reform and transformation of these platforms [6] Group 1: Local Government Actions - Hangzhou's finance bureau reported high-quality implementation of debt reduction policies, aiming for complete clearance of financing platform debts by year-end [1] - Jinhua City emphasized the need to prevent new hidden debts while ensuring the completion of this year's debt reduction tasks [2] - Various regions, including Longyan and Xinjiang, have reported successful completion of hidden debt clearance ahead of schedule [4][5] Group 2: National Policy and Oversight - The State Council's report highlighted the need for a long-term mechanism to prevent and resolve local government debt risks [3] - The Ministry of Finance has mandated that local governments complete the clearance of hidden debts by the end of 2028, with expectations of sufficient debt reduction funds available [3][10] - Financial institutions are actively supporting local platforms in reducing costs and managing risks, which has improved asset quality and reduced risks [8][9] Group 3: Future Outlook - Analysts predict that after significant debt pressure is alleviated, local governments will have more policy space and financial strength to focus on developing manufacturing and service industries [10] - The ongoing transformation of financing platforms is expected to lead to successful market-oriented operations, enhancing their cash flow and creditworthiness [6][10]