Hard on the heels of weak trade data showing a sharp fall in imports, the central government is easing restrictions on local governments’ borrowing for major infrastructure investments.
According to Caixin Global, local governments will be allowed to use proceeds from special-purpose bonds to raise project capital for major and strategic investments in highways, railways, electricity and gas projects. Citing a document issued by the central government, Caixin says it also encourages local authorities and financial institutions to expand funding sources for major projects through market-based financing methods “as long as they follow the rules”.
Special bonds must be used for projects that are proven to make certain returns on investment, according to the statement. Local officials should strengthen risk controls for special bond issuance and project management, it added.
China previously prohibited local governments from using any borrowed money as project capital put up by investors for initial investment in infrastructure to curb local debt surges.