MORE than half of the high-interest local government debt in China that falls due in 2015 will be covered under a planned local government debt swap, the Ministry of Finance said Friday, unveiling detailed measures of its plan to replace existing local government debt.

    The ministry said in a statement that based on an audit done in June 2013, the total repayments due this year from local governments are 1.86 trillion yuan (US$296.71 billion).

    It said that 53.8 percent of that total would be covered by the coming debt swap. On March 8, the ministry announced local governments would be permitted to swap 1 trillion yuan in maturing, high-interest local debt for new official municipal or provincial bonds to help them reduce interest costs.

    The latest statement appears to be designed to discourage speculation that the Central Government would be directly purchasing bonds.

    Provinces and municipalities will be primarily responsible for issuing and repaying the new debt, the ministry said.

    Last May, China took the watershed step of letting local governments sell and redeem their own bonds in an experiment to straighten out its State budget and start cleaning up its US$3 trillion public debt problem.

    Although Friday’s statement did not lay out a mechanism for how the debt swap would operate, the language was identical to the May 2014 announcement, suggesting that the new debt will also be auctioned to qualified banks and financial institutions. (SD-Agencies)