China mulls bond sales by local government

Chinese top legislature is considering to give the greenlight to bond sales by local governments at provincial levels, but under strict conditions. According to a draft revision to the country's budget law tabled for the third reading at the bimonthly session of the National People's Congress (NPC) Standing Committee, authorized provincial-level governments can issue bonds within a quota set by the State Council, China's cabinet, and approved by the NPC or its standing committee. Money raised by the bond sales can be used to partly finance construction investments that have been included in the provincial-level governments' general public budget plans, it said. No other forms of debt raising by local governments and their subordinate organs would be allowed under the draft revision. Furthermore, local governments and their subordinate departments should not provide debt guarantees for any institutions or individuals, it said. In addition, stable capital sources should be put in place for the repayment of government debts raised by the bond issuing, and the money borrowed cannot be used in recurrent expenditures, according to the draft revision.