Huatai Securities: The changes and unchanged aspects of the new round of debt-to-equity swaps

Golden Ten Data on November 10, Huatai Securities Research Report said that the local implicit debt package combination boots landed. Huatai Securities believes that the integrated debt plan is in line with expectations. The underlying logic of the idea of reducing debt reflects more of the idea of "supporting the bottom line and preventing risks" rather than the idea of "strong stimulus". There are three goals for debt reduction: (1) to solve the "urgent needs" of local governments; (2) Promote the solution of various local "triangular debt" problems, and drop the loss of bad debts of financial institutions. (3) Reverse the dilemma of excessive occupation of financial resources by existing debts. The three basic principles of debt reduction have not changed: (1) The debt repayment responsibility of local governments has not been changed. The underlying logic is still "whose child will hold it". (2) Resolutely curb the addition of new hidden debts, and avoid the disposal of "old accounts" and the addition of "new accounts". (3) Compared with the previous round of debt in 2015-2018, the hard constraints on local fiscal budgets and debts in the future are stronger, which means that it is becoming more and more difficult for local governments to repeatedly "borrow on the edge + borrow on the side" in the past decade, and the independent financing ability of local finance will be limited, and the transformation of urban investment is imminent.