The special obligations of the local government to be rationalized


Prime Minister calls for efforts to consolidate gains made in debt management

China will refine the management of special obligations of local governments, optimize the use of funds and strengthen their supervision, an executive meeting of the State Council 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, China’s highest legislative assembly, local authorities have issued and used special local government bonds, where appropriate, providing a basis strong for the development of key projects and large livelihood programs.

Faced with the new downward economic pressure, China will step up intercyclical adjustment, according to the meeting.

While strengthening local government debt management and anticipating and defusing risks in a sustainable manner, special bond management policies for this year and the next will be aligned in a coordinated manner to better leverage the funds raised through the issuance of special bonds to encourage private investment and expand efficient investment. This helps to stimulate domestic demand and stimulate consumption.

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

The remaining quota of special bonds for this year will be issued at a faster rate. Work on fund allocation and expenditure management will indeed move forward, to see that more funds help produce real gains in the real economy early next year.

In accordance with the project funding allocation requirement, projects and financial needs for next year’s special obligations will be identified. Provincial governments are required to intensify preliminary works and pipeline projects that meet the needs of economic and social development, and to launch mature projects at the appropriate time.

In light of local conditions and the need for coordinated regional development, next year’s quota and special bond distribution plans will be developed appropriately to speed up construction in key areas. The funds will not be used indiscriminately. The early issuance of certain allowances will be studied in accordance with the laws, regulations and procedures in force.

Funds must be used to achieve more effective results. More rigorous scrutiny and supervision will be applied to beneficiaries and other aspects of the use of funds. It is forbidden to spend on government buildings and projects just for appearance. Any misappropriation of funds, violation of disbursement rules or long-term inactivity of funds will be strongly discouraged.

“We have to get the right intensity. The special bonds have to be well issued and used efficiently. We have to both avoid risks and ensure efficiency,” Li said.

The meeting underlined that the audit-based monitoring and full inspection of funds raised through special obligations will be intensified. The problems that have been identified will be strictly rectified and the measures to ensure accountability will be vigorously implemented. Punitive measures, including the recovery of unused funds and the reduction of additional quotas, will be applied as necessary.

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