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November 26, 2021

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China refines local govt bonds

China will refine the management of special local government bonds, optimize utilization of the funds and strengthen their supervision, the State Council’s executive meeting chaired by Premier Li Keqiang decided on Wednesday.

Since the beginning of this year, in accordance with the newly-added quota approved by the National People’s Congress, local authorities have issued and utilized special local government bonds as appropriate, providing a strong underpinning for the development of key projects and major livelihood programs.

Facing the new downward economic pressure, China will enhance cross-cyclical adjustments. While strengthening local government debt managements and forestalling and defusing risks on a sustained basis, the special bond management policies for this year and the next will be aligned in a coordinated way to better harness the funds raised from special bonds issuance in spurring private investment and expand effective investment.

This is conducive to boosting domestic demand and spurring consumption.

“In recent years, local government debt management has yielded positive results. Hidden debts have fallen, and the government’s overall leverage ratio has moderately declined while maintaining stability. We should continue to consolidate the gains,” Li said.

The remaining quota of the special bonds for this year will be issued at a faster pace. Work on fund allocation and expenditure management will be effectively advanced, to ensure more funds help produce gains in the real economy early next year.

In keeping with the requirement of project-based funding allocation, projects and financial needs for next year’s special bonds will be identified. Provincial-level governments are required to strengthen coordination, step up the preliminary work and reserves of projects that meet the needs of economic and social development, and kick-start mature projects at an appropriate time.

In light of both local conditions and the need for coordinated development across regions, quota and distribution plans for next year’s bonds will be crafted as appropriate, to boost construction in key areas.

The funds shall not be used in an undifferentiated manner. Early issuance of some quotas will be explored in accordance with laws, regulations and due procedures.

The funds must be used for effective results. More rigorous examination and supervision will be enforced on the recipients and other aspects in the use of funds. Spending on government buildings, projects solely for the sake of appearances and unnecessary projects pursued solely for landscaping is prohibited.

Embezzlement, breach of disbursement regulations, and long-term idleness of funds will be deterred.

“We must get the intensity right. Special bonds must be well-delivered and effectively used. We need to both avert risks and ensure efficiency,” Li said.


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