Jan 21, 2019 (China Knowledge) - Earlier issuances of local government debt this year will play an important role in narrowing the infrastructure financing gap and promoting economic growth this year.
Bidding for the first batch of local government bonds will start today with the aim of raising more than RMB 135 billion over the week, equivalent to more than 6% of the total local government bond issuance last year.
The bond issuance comes after RMB 580 billion of general bonds and RMB 810 billion of special purpose bonds have been approved in advance this year, with the government issuing a directive to provincial level finance departments to quickly channel funds raised into major investment projects.
Funds raised are not allowed to be retained in the national treasury or other government departments but used as soon as possible for investment projects in the queue to stabilize investment and boost domestic demand.
Local government bond issuance is expected to increase this year to between RMB 4.5 trillion to RMB 4.6 trillion from RMB 4.17 trillion last year and the country may set its fiscal deficit to 2.8% of GDP, up from 2.6% last year.
The more flexible policies this year will better allow governments to manage economic headwinds to ease downside pressure.
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