EB Securities: The implementation of debt-for-equity swaps policy promotes development, and the infrastructure chain may directly benefit.

EB SECURITIES recently released a research report stating that the current debt-for-bond policy will effectively alleviate the pressure on local government debts, releasing more resources and policy space for development. Previously, the phenomenon of the slow progress of infrastructure projects due to delayed funds may be somewhat improved. Industries such as cement may directly benefit from this. Anhui Conch Cement (600585.SH), Huaxin Cement (600801.SH), and Tianshan Material (000877.SZ) are recommended for investment. After the relief of pressure on local government debts, the risk of bad debts provision for receivables from state-owned enterprises and local enterprises with a significant amount of business transactions with local governments may significantly decrease. Asset prices are expected to be reassessed, and China State Construction Engineering Corporation (601668.SH), and Sichuan Road & Bridge Group (600039.SH) are recommended for investment. The fundamentals of private enterprises closely related to local government businesses may also see improvements, and CECEP Tech and Ecology & Environment (300197.SZ) is suggested for attention. The total amount of debt conversion is 12 trillion, significantly reducing the pressure of local government debt On November 8th, the 14th National People's Congress Standing Committee held its 12th meeting. The meeting approved the resolution of the National People's Congress Standing Committee on the approval of the "State Council's Proposal to Increase the Debt Limit of Local Governments for the Replacement of Hidden Debts" proposal. By 2028, the total amount of hidden debts that local governments need to digest will be significantly reduced from 14.3 trillion to 2.3 trillion, with the average annual digestion reduced from 2.86 trillion to 460 billion, less than one-sixth of the original, greatly alleviating the debt conversion pressure. Change in debt conversion strategy: from focusing on risk prevention to a dual focus on risk prevention and development promotion The Ministry of Finance stated that the implementation of such a large-scale replacement measure signifies a fundamental change in the debt conversion strategy. From the policy effects perspective: on the one hand, it eases the current debt pressure of local governments, reducing interest expenses and saving about 600 billion yuan over five years; on the other hand, it helps local governments smooth the funding chain, enhance development momentum, free up resources and policy space originally used for debt conversion to promote development, improve people's livelihood, provide greater support for investment, consumption, technological innovation, etc., promote stable economic restructuring, and plan and promote high-quality development. At the same time, it can improve the quality of financial assets, enhance credit lending capacity, and benefit the real economy. The Ministry of Finance is actively planning the next step of fiscal policy, increasing counter-cyclical adjustment efforts, implementing a more powerful fiscal policy next year in line with economic and social development goals, including actively utilizing the available deficit space, etc.