Expert interpretation: debt substitution is beneficial for implementing tax reduction and fee reduction

On October 12th, Jin10 Data reported that Luo Zhiheng, chief economist of Yuekai Securities, stated that increasing the debt limit to replace the implicit debt of local governments is of great significance to fiscal economy. Debt replacement realizes the explicitization of part of the implicit debt and makes the debt more open and transparent. By replacing implicit debt with government bonds with lower interest rates and longer cycles, which have higher borrowing costs and shorter cycles, the debt replacement process is also a process of dropping risks, reflecting the essence of debt resolution is to resolve risks. Luo Zhiheng believes that debt replacement reduces the pressure of local government debt and enables local governments to free up more financial resources and energy for economic development and public services. Debt replacement is conducive to local governments better implementing tax reductions and fee reductions, and phenomena such as “arbitrary fines and fees” in some areas will be significantly alleviated or even eliminated, which is conducive to improving the business environment.