0 Comment(s)
Print
E-mail China.org.cn, February 17, 2025
Bloomberg:
In recent years, the MOF has emphasized improving government debt transparency. Meanwhile, revenue from local special bond projects has been declining. Some scholars advocate for issuing general bonds instead of special bonds for project investments to reduce financing costs. What is the MOF's perspective on this? Thank you.
Liao Min:
Thank you to the Bloomberg reporter for the question. I would like to ask Mr. Wang to respond.
Wang Jianfan:
Thank you for your question. Government debt management is a critical aspect of fiscal policy and an important component of economic and social development. In recent years, the MOF, in collaboration with relevant parties, has continuously enhanced the government debt management system and optimized the composition of government debt. On the one hand, we have scientifically arranged the scale of fiscal deficits, increased central-to-local transfer payments, and optimized the issuance of local government general bonds to reduce interest burdens and enhance fiscal capacity at the local level. On the other hand, we have reasonably expanded the scope of special bonds, increasing their use for project capital in terms of scope, scale and proportion to stimulate effective investments.
To implement the decisions and arrangements of the CPC Central Committee and the State Council on strengthening the management of local government special bonds, the General Office of the State Council recently issued the Opinions on Optimizing and Improving the Local Government Special Bond Management Mechanism. This document outlines seven key areas and 16 specific measures to assist local governments in better utilizing special bonds to strengthen infrastructure, address shortcomings, enhance public welfare and expand investment. This document, released to the public on Dec. 25, establishes a new mechanism for managing special bonds. The new features of this mechanism can be understood in five aspects:
First, it introduces a "New List" for target areas. Since 2019, we have utilized a "positive list" to define the areas eligible for special bond allocation, which includes sectors such as transportation, municipal infrastructure, industrial park infrastructure and major national strategic projects. The recently issued opinions transition from "positive list" management to a "negative list" approach. The "negative list" identifies prohibited categories, including non-revenue-generating projects, administrative office buildings, wasteful prestige projects, performance-driven projects, general competitive industries, and regular expenses such as personnel costs. Special bonds are not permitted for these categories, while all other projects can receive support. This has given local governments greater flexibility to arrange projects according to their specific circumstances.
Second, the mechanism's "New Scope" expands areas designated for use as project capital. The areas where special bonds can be used as project capital have increased from the original 17 industries to 22. Five new sectors have been added, including infrastructure for emerging industries, health care, elder care and child care, freight hubs, and urban renewal, along with various sub-industries. Meanwhile, the maximum proportion of special bonds that can be used as project capital at the provincial level has been increased from 25% to 30%. This expansion in both scope and scale enhances local governments' ability to boost investment capacity and promote economic structural transformation.
Third, the mechanism introduces a "New Model" for project review. We have piloted a "self-auditing and self-issuing" approach in 10 provinces and the Xiong'an New Area, aimed at granting local governments greater flexibility and autonomy. This measure is designed to accelerate the issuance and utilization of bond funds, improve allocation efficiency, and strengthen local governments' primary responsibilities while mitigating legal debt risks. The specific approach is that in the pilot areas — 10 provinces and the Xiong'an New Area — special bond projects no longer require review by national ministries. Instead, once approved by the provincial government, projects can proceed to issuance. In other provinces, projects will still follow the original channels for submission, but improvements have been made to increase the frequency of project submissions to four times a year, providing one submission window each quarter. This gives local governments more options and the flexibility to refine their project proposals in a timely manner. Local governments will regularly submit projects, while national ministries will conduct periodic reviews to ensure quality and improve work efficiency. All provinces will implement a "green channel" for ongoing projects, meaning that ongoing projects that have already been approved and issued special bonds by national ministries do not need to be resubmitted. Once approved by provincial governments, these projects can proceed directly to issuance.
Fourth, the mechanism broadens the "New Sources" for repaying special bonds. Local governments are permitted to allocate fiscal subsidy funds over multiple years, in addition to special revenue and corresponding government fund revenues. They can also reallocate other project-specific revenues, project entity funds, and government fund income to ensure timely and adequate repayment of principal and interest. This approach aims to achieve regional balance among cities and counties within the province while effectively preventing repayment risks.
Fifth, the mechanism establishes "New Requirements" for the comprehensive management of borrowing, utilization and repayment. Special bond funds are now subject to exclusive account management and are earmarked for specific purposes, ensuring strict prevention of fund misappropriation or diversion. Asset accounting for new projects has been standardized, providing clear guidelines for how administrative institutions and state-owned enterprises should register and manage their assets. Existing project assets are categorized and managed, with detailed records maintained in comprehensive ledgers. Regions with the necessary conditions are encouraged to establish special bond repayment reserve funds. All "self-auditing and self-issuing" pilot areas are required to expedite the creation of repayment reserve system.
Next, the MOF will collaborate with the National Development and Reform Commission and other relevant departments to effectively implement policies. They will guide local governments in improving the management mechanisms for special bonds, ensure the effective management and utilization of special bond funds, fully unleash the effectiveness of these policies, and promote sustained economic recovery. Thank you.
Go to Forum >>0 Comment(s)