Encouraging Local Bond Issuance Amid Concerns Over China's Q4 Economic Growth

Premier Li Keqiang Proposes Fiscal Policy Card of Local Bonds to Stimulate Economy
Prohibits Issuance Funds from Flowing into Real Estate... Directs Use Only for Domestic Demand and Consumption Promotion

[Asia Economy Beijing=Special Correspondent Jo Young-shin] Premier Li Keqiang of China has instructed local governments to expedite the issuance of local government bonds to stimulate the economy.

[Image source=Yonhap News]

As concerns arose that China's fourth-quarter economic growth rate could deteriorate due to the resurgence of COVID-19, rising international raw material prices, and power shortages worsening the domestic and international economic environment, encouragement for local bond issuance appears to have been given.

According to Chinese state media such as Xinhua News Agency and People's Daily on the 25th, Premier Li convened a State Council executive meeting the previous day, stating, "Downward pressure on the economy in the second half of the year is intensifying," and urged, "Please expedite the issuance of local government bonds with remaining quotas so that funds can be used for major livelihood projects such as expanding domestic demand and promoting consumption."

Premier Li said, "As a result of the Central Committee of the Communist Party and the State Council focusing on local bond management, hidden debts have decreased, achieving positive effects," and added, "Issue local government bonds within the quota approved by the National People's Congress (NPC) earlier this year."

The purpose of the funds raised through local bond issuance was also clarified.

Premier Li emphasized, "Funds raised through local bond issuance must not be used for real estate construction, urban beautification projects, or showy projects," and warned, "If funds are used for purposes unrelated to people's livelihood, strict measures such as fund recovery and reduction of new issuance quotas will be taken." He further cautioned, "If embezzlement or other misconduct is discovered during the local bond issuance process, corresponding punishments will follow."

Premier Li's directive to issue local government bonds indicates that the Chinese economy is being affected by external conditions. In fact, fixed asset investment has been sluggish, with infrastructure investment in China growing only 1% year-on-year through October this year. For this reason, the Chinese Ministry of Finance recently encouraged the issuance of special-purpose bonds.

He Daixin, Director of the Fiscal Strategy Research Institute at the Chinese Academy of Social Sciences, evaluated Premier Li's remarks on local bond issuance, saying, "Local bond issuance is part of fiscal policy and one of the main policy tools to regulate the economy," and added, "Efficient investment through local bond issuance can support growth."

This content was produced with the assistance of AI translation services.