China urges local governments to increase spending to tackle recession – News Couple
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China urges local governments to increase spending to tackle recession


(Bloomberg) — China’s State Council has called on local governments to sell more private bonds this year in order to boost investment amid a slowdown in the economy.

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Premier Li Keqiang presided over a meeting of the State Council, China’s cabinet, on Wednesday, urging local governments to continue building projects at the beginning of next year, Xinhua news agency reported. He also called on them to make better use of private bond yields to expand domestic demand.

Regional governments should speed up project preparation, facilitate the launch of mature projects, and make reasonable requests for special bond stakes next year, according to Xinhua. The authorities will study the possibility of granting some shares of the bonds before next year, according to the report, as they have done in the last two years.

Premier Li stressed that the economy is facing “new downward pressure” and the cyclical cross policy needs to be strengthened. Economists have trimmed their fourth-quarter growth forecast to an average of 3.1%, while some say the pace of the economy next year may be slower since 1990, barring the impact of the pandemic last year.

Local government bond sales were particularly slow in the first 10 months of this year, in part due to a lack of high-quality projects. The Finance Ministry had previously urged local authorities to finish issuing all bonds within the current year’s quota by November.

The State Council meeting said local governments have achieved positive results in debt management and in reducing so-called hidden debt in recent years, with the government’s public debt-to-GDP ratio falling. According to the meeting, the authorities need to step up scrutiny and monitoring of proceeds from bond sales.

Fiscal policy will play a greater role in ensuring a stable start to the economy in 2022, according to the China Securities Journal, which is published by the Xinhua News Agency, Thursday. While local governments’ income from land sales may fall, they should issue more private bonds to help fund investment projects, Zhou Jianfeng, an economist with CITIC Securities Ltd., was quoted as saying by the newspaper.

Regional authorities may issue more than 4 trillion yuan ($630 billion) of special bonds next year, up from 3.65 trillion yuan in this year’s budget, the Securities Times reported on Wednesday, citing another analyst, Cheng Qiang of CITIC.

(Updates in more detail on the State Council meeting in the sixth paragraph)

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