Local governments may sell municipal bonds
China may allow local governments to sell municipal bonds under narrow parameters in a move to regulate their borrowing and reduce systemic risk.
Qualified provincial-level governments that win approval from the State Council, the country’s cabinet, will be able to raise some of the funds needed for construction projects through bonds, if a draft amendment to the Budget Law is approved by the top legislature.
The current Budget Law, which is some two decades old, bars most debt issues by local governments. But governments at all levels have managed to raise funds in recent years through bank loans or via local government financing vehicles to pay for a plethora of infrastructure projects.