MNI POLICY: China Adds Caution after Easing Debt Restrictions

     BEIJING (MNI) - China said a policy announced by the State Council

yesterday allowing local government to raise capital for infrastructure projects

through the so-called special bonds shouldn't be seen as backing off efforts to

contain the country's leverage ratios.

     In a statement today carried by several government ministries including the

People's Bank of China, an unidentified spokesperson again downplayed the

country's debt levels are relatively low and asserted that debt raising by local

governments is under control. 

     In an effort to revive growth, the central government has urged regional

authorities and financial institutions to utilize special bonds and market-based

instruments to fund qualified major projects such as the Belt and Road

Initiative, economic integration of the Yangtze River Delta and social welfare

projects, according to the statement.

     However, only major projects proven to generate returns and are in line

with national strategies, such as highways, railways, electricity and gas

projects, may qualify the revamped special bond scheme, the government said.

     Local governments however must not take advantage of the policy to amplify

their leverage, according to the statement.

     The latest loosening measure may allow more government-led investment into

infrastructure and raise this year's investment growth to as much as 9%, CITIC

Securities said in a report. 

--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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