China has announced a policy shift allowing local authorities increased flexibility in deploying special government bonds across a wider array of projects, while also streamlining the approval process to enhance the efficiency of public funding aimed at boosting economic growth.
This initiative underscores the government’s focus on intensifying domestic demand as export growth faces risks from potential trade tensions with the United States.
Under the new guidelines, local governments can channel these bonds into various investments, except for those specified on a restricted list published by the cabinet. Exclusions include non-revenue generating projects, government buildings, vanity constructions, and commercial properties.
Notably, eleven key regions, including economic powerhouses like Guangdong, will be granted the autonomy to approve bond-financed projects, which formerly required approval from the central economic planning body and the Finance Ministry.
Amidst declining investment returns across the economy, the sales of these local government bonds have been sluggish this year, reflecting diminished economic growth support.
Meanwhile, the guidelines permit these bonds to constitute a larger portion of total investment in projects, particularly in sectors such as information technology, elder care, and childcare.
This measure is part of Beijing’s strategy to maintain government investment as a pivotal driver of economic expansion, despite efforts to transition towards a consumption-driven model given the current sluggish consumer spending.
