(Yicai) Oct. 17 -- Local governments across 29 Chinese provinces have finished issuing about CNY2 trillion (USD280.6 billion) in refinancing special bonds that are used to clear up debt that was not included on their official books, essentially completing this year’s target.

Jiangsu, an economic powerhouse in eastern China, led with CNY251.1 billion (USD35.2 billion) of hidden debt swaps, followed by Hunan, Shandong, Guizhou, Henan, and Sichuan, each of which replaced more than CNY100 billion, according to data disclosed on financial information platform Qiye Yujingtong.

Hidden debt refers to local government borrowing through financing vehicles that is not recorded in official fiscal accounts, thereby posing significant risks. To tackle this issue, China announced a three-year plan last November to sell local refinancing bonds totaling CNY2 trillion a year to replace existing hidden debts.

Among the 31 provincial-level regions on the Chinese mainland, Guangdong and Shanghai had already reduced their implicit liabilities to zero before the policy was launched and will not issue any refinancing bonds.

Finance Minister Lan Foan said last month that roughly two-thirds of the planned CNY6 trillion bond quota had been used up as of the end of August, including part of the allocation from last year. This reduced the average interest rate on these debts by more than 2.5 percentage points, cutting interest costs by over CNY450 billion (USD63.1 billion).

The campaign has also hastened the winding-up of local government financing vehicles. By the end of June, more than 60 percent had been closed, helping improve the asset quality of financial institutions and materially reducing systemic risk, Lan noted.

China will continue implementing a package of debt resolution measures, including the early release of part of next year’s local government debt quota in this quarter of the year to speed up the disposal of existing hidden debts, he added.

Editor: Dou Shicong, Emmi Laine