(Yicai Global) May 26 – With the approval of the State Council, China's Ministry of Finance has capped Beijing's local government bonds at CNY52.5 billion (USD7.6 billion) this year, said Li Yingjin, the city's finance department director, adding that the Beijing government plans to use the full amount of local government bonds allocated, and the proceeds will be spent mostly on major construction projects in the secondary city center.
He made the remarks at a meeting of the Standing Committee of the 14th Beijing Municipal People's Congress yesterday, where he gave a report on the limits on government borrowing in 2017 and a proposal to adjust municipal budget.
In order to effectively regulate macroeconomic development through government borrowing and ease fiscal pressure, the Beijing government plans to issue local government bonds to the maximum limit (CNY52.5 billion), because government bonds are cost-effective and have a long maturity, he said.
Proceeds from new local government bonds will be mainly invested in five areas: CNY14.11 billion has been earmarked for development of the second city center and preparations for International Horticultural Exhibition 2019; CNY13.237 billion will be used to redistribute non-capital functions from Beijing; CNY9 billion will be spent on land reserve; CNY8.379 billion will be invested in environmental rehabilitation, and CNY7.77 billion in transportation infrastructure construction.
Regarding the public debt management, he said, the government will settle existing debts through debt-to-bond swap, repayment with fiscal funds, debt transformation through market-based operations and debt write-off. Overall, government debts in Beijing are under control, he emphasized.
Outstanding government debts in the city totaled CNY405.2 billion as of the end of last year, down 40.5 percent year-on-year. Debts owed by the government fell 34.7 percent to CNY374.1 billion, and contingent debts were down 71.31 percent to CNY31.1 billion.