China considers local government bonds to combat debt

BEIJING – China’s Ministry of Finance has been circulating a document that contains a proposal to allow local governments to issue bonds to repay existing debts. These bonds would cover debts stemming from projects governments have paid for as of December 31, and involve both direct debts as well as contingent liabilities.

 A condition to the proposal is that local governments would be required to tally up their debt and send reports to the Ministry by January 5; in the same vein, the amount of debt a particular local government can take on will be set as of that date, and they will be prohibited from taking on any more past that point.

The model also encourages local governments to collaborate more frequently with private investors for projects such as building new infrastructure. www.webershandwick.cn (ATI).