(ATG) Officials from China’s State Council announced an increase in the scale of local government special bonds, the People’s Daily reported on Friday April 3.
The officials said financial support for small and medium-sized businesses was the focus of the increase.
Vice Minister of Finance Xu Hongcai outlined five measures to be incorporated into new issues of local government special bonds. He did not say how much more money would be allocated to special bonds, but just indicated that there would be more.
The main focus of these bonds is to allow local governments to invest in municipal facilities and projects such as emergency medical treatment, public health, vocational education, urban heating and gas supply, plus to sped up the building of 5G networks and data centers, artificial intelligence and other ‘new’ infrastructure. The funds would also be allocated to major projects proposed by the provinces, if approved.
China fears social unrest during economic downturns, so the country usually launches a vast swathe of government projects to occupy an otherwise idle workforce.
Scale of bonds much higher
The scale of these bonds will be much higher in 2020 due to the coronavirus and global economic downturn. In 2019, 810 billion yuan in special bonds were issued, while in 2020 the figure is already at 1.29 trillion yuan. And more bonds will still be issued this year.
Secondly, processing of special bonds has been speeded up dramatically in a bid to quickly hedge against the impact of the epidemic.
Thirdly, the funds must be spent with strict adherence to projects they are allocated to.
Fourth, projects should fall under the seven major areas of transportation infrastructure, energy projects, agriculture, forestry and water conservancy, ecological and environmental protection, services, logistics facilities, and municipal and industrial park infrastructure. Urban regeneration projects will now come under the scope of these bonds. Major national projects will be dealt with separately.
The fifth measure is to increase the proportion of special bonds as capital for major projects and increase their leading role. For new special bonds this year, local governments are allowed to appropriately increase the proportion of capital used for major projects.