Local governments will be authorized to issue bonds, but the central government will exert control over the funding process.
Luo Jieqi and Zhou Qiong, Caijing 10 March 2009
Local governments will be authorized to issue bonds to fund deficit spending under a one-time “special arrangement” as China tries to revive economic growth, according to Gao Qiang, vice chairman of the Financial and Economic Committee under the National People’s Congress.
Speaking at a media briefing, Gao said the finance ministry will act as an agent for the local government bond issues - which will be subject to State Council approval - to ensure they benefit from economies of scale, reducing the overall cost.
China last week announced a budget deficit forecast of 950 billion yuan in 2009, including a 750 billion yuan deficit for the central government, with local governments able to engage in deficit financing totalling 200 billion yuan in the form of bond issues.
China’s vice finance minister said last weekend that the central government should adjust legislation to enable local governments to issue the bonds more easily and directly.
But the comments by Gao are a reminder from the central government that it will continue to exert control over the funding process, permitting local governments to seek special funding only under extraordinary circumstances, such as the current economic crisis.
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Local Govt Bond Issues a ‘Special Arrangement’
Local governments will be authorized to issue bonds, but the central government will exert control over the funding process.
Luo Jieqi and Zhou Qiong, Caijing
10 March 2009
Local governments will be authorized to issue bonds to fund deficit spending under a one-time “special arrangement” as China tries to revive economic growth, according to Gao Qiang, vice chairman of the Financial and Economic Committee under the National People’s Congress.
Speaking at a media briefing, Gao said the finance ministry will act as an agent for the local government bond issues - which will be subject to State Council approval - to ensure they benefit from economies of scale, reducing the overall cost.
China last week announced a budget deficit forecast of 950 billion yuan in 2009, including a 750 billion yuan deficit for the central government, with local governments able to engage in deficit financing totalling 200 billion yuan in the form of bond issues.
China’s vice finance minister said last weekend that the central government should adjust legislation to enable local governments to issue the bonds more easily and directly.
But the comments by Gao are a reminder from the central government that it will continue to exert control over the funding process, permitting local governments to seek special funding only under extraordinary circumstances, such as the current economic crisis.
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