Launch of Local Government Bonds in China
19 Pages Posted: 25 Nov 2009
Date Written: November 19, 2009
Abstract
In November 2008, China announced a RMB4trn package of economic stimulus measures that also dealt with how it would be funded. As a result, in March 2009, the National People's Congress (China's parliament), with the approval of the central government, authorized the Ministry of Finance to issue RMB200bn of local government bonds on behalf of all China's local governments. Under China's 1994 Budget Law, local governments are not normally allowed to issue bonds. The measure, although it only applies for one fiscal year, is therefore ground-breaking. We will continue to monitor related developments such as the issue of who will be responsible for redeeming the bonds and the issue of how transfer payments will be managed to enable China to reduce regional inequalities.
Keywords: China, local government bonds, bonds
JEL Classification: G18, H53, H54, H61, H63, H72, H74, H77, R51
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