Circular on Working Effectively on the Issuance of Special Local Government Bonds and the Supportive Financing for Projects
Circular on Working Effectively on the Issuance of Special Local Government Bonds and the Supportive Financing for Projects
Circular on Working Effectively on the Issuance of Special Local Government Bonds and the Supportive Financing for Projects
June 10, 2019
Relevant issues are, with the approval of central leading comrades, hereby notified as follows in order to carry out the decisions and deployments of the Central Committee of the Communist Party of China ("CPC") and the State Council, reinforce countercyclical regulation, better develop the important role of special local government bonds (hereinafter referred to as "special bonds"), focus on increasing the support for key areas and weak links, increase effective investment, optimize economic structure, stabilize aggregate demand, and maintain sustained and healthy economic development.
I. General Requirements and Basic Principles
1. General requirements. We shall take Xi Jinping's Thought on Socialism with Chinese Characteristics for a New Era as the guide, fully implement the spirit of the 19th CPC National Congress and the second and third plenary sessions of the 19th CPC Central Committee, seriously carry out the decisions and deployments of the Central Committee of the CPC and the State Council, and work hard to develop delivered solid progress in the critical battles against great potential risks. We shall insist on supply-side structural reform as our main task and hold structural deleveraging as the basic thinking to further improve the local government debt financing mechanism and push forward special bond management reform on firm, controllable, systematic and appropriate principles, strengthen macro policy coordination and cooperation on the basis of remarkable increase of the scale of special bonds to keep the market liquidity reasonable and abundant, work efficiently on the issuance of special bonds and the supportive financing for projects, and maintain economic operation within a reasonable range.
2. Basic principles
-- Insist on a combination of guiding and blocking. We shall solve the contradictions and problems arising from development by means of reform and coordinate "opening the front door" with "blocking the back door". While we work on strict control of hidden local government debts (hereinafter referred to as "hidden debts"), firm containment of increase of hidden debts and firm rejection of construction by means of disorderly borrowing, we shall also reinforce countercyclical regulation, clarify the boundary between government and market, encourage market-oriented financing according to laws and regulations, increase effective investment, promote the virtuous cycle of macroeconomy, and improve the quality and sustainability of economic and social development.
-- Insist on coordination and cooperation. We shall implement the "combination punches" kind of policies scientifically and strengthen policy coordination and cooperation in finance, currency, investment and so on. We shall effectively improve active financial policies, fully develop the role of special bonds and support major projects of public interest (hereinafter referred to as "major projects") which have certain proceeds but cannot easily attain commercially compliant financing. Sound monetary policy shall be neither too tight nor too loose. We shall work effectively on the issuance of special bonds and the supportive financing for projects and guide financial institutions to strengthen financial services and guarantee the reasonable financing demands for major projects based on business principles according to laws and regulations.
-- Insist on emphasis on key issues. We shall faithfully select the right projects of special bonds, concentrate funds to support the construction of major projects in progress, make up short boards and drive to expand consumption, give priority to solving follow-up financing for those necessary projects in progress in order to form physical workload as soon as possible and avoid any uncompleted project.
-- Insist on risk prevention and control. We shall understand the current situation from the long-term general trend over time, and insist on the promotion of high-quality development and matching loan borrowing with solvency. Special bonds must be used for major projects having certain proceeds, and the financing scale thereof shall be balanced with project proceeds. Local governments shall strengthen the prevention and control of risks in special bonds and project management. Financial institutions shall carry out independent examination and approval and make decisions prudently based on business principles to firmly prevent and control risks.
-- Insist on the stabilization of expectations. We shall not only reinforce countercyclical regulation of macro policy and actively undertake preemptive adjustment and fine-tuning but also uphold the general tone of seeking stability and progress in order to accurately grasp the degree of macro control, and stabilize and improve market expectations. We must uphold the reform direction of structural delegation and firmly reject policies that would have an economy-wide impact. We shall implement the principles of firm accountability, lifelong accountability and responsibility reverse-checking in the case of the launch of new projects by borrowing hidden debts.
II. Support for the Financing of Special Bond Projects
1. Reasonably specify the standards for the financial support of special bond projects. We shall develop the driving role of special bonds and the market-oriented financing advantage of financial institutions, and push forward the construction of major projects supported by special bonds according to laws and regulations.
......
June 10, 2019
Relevant issues are, with the approval of central leading comrades, hereby notified as follows in order to carry out the decisions and deployments of the Central Committee of the Communist Party of China ("CPC") and the State Council, reinforce countercyclical regulation, better develop the important role of special local government bonds (hereinafter referred to as "special bonds"), focus on increasing the support for key areas and weak links, increase effective investment, optimize economic structure, stabilize aggregate demand, and maintain sustained and healthy economic development.
I. General Requirements and Basic Principles
1. General requirements. We shall take Xi Jinping's Thought on Socialism with Chinese Characteristics for a New Era as the guide, fully implement the spirit of the 19th CPC National Congress and the second and third plenary sessions of the 19th CPC Central Committee, seriously carry out the decisions and deployments of the Central Committee of the CPC and the State Council, and work hard to develop delivered solid progress in the critical battles against great potential risks. We shall insist on supply-side structural reform as our main task and hold structural deleveraging as the basic thinking to further improve the local government debt financing mechanism and push forward special bond management reform on firm, controllable, systematic and appropriate principles, strengthen macro policy coordination and cooperation on the basis of remarkable increase of the scale of special bonds to keep the market liquidity reasonable and abundant, work efficiently on the issuance of special bonds and the supportive financing for projects, and maintain economic operation within a reasonable range.
2. Basic principles
-- Insist on a combination of guiding and blocking. We shall solve the contradictions and problems arising from development by means of reform and coordinate "opening the front door" with "blocking the back door". While we work on strict control of hidden local government debts (hereinafter referred to as "hidden debts"), firm containment of increase of hidden debts and firm rejection of construction by means of disorderly borrowing, we shall also reinforce countercyclical regulation, clarify the boundary between government and market, encourage market-oriented financing according to laws and regulations, increase effective investment, promote the virtuous cycle of macroeconomy, and improve the quality and sustainability of economic and social development.
-- Insist on coordination and cooperation. We shall implement the "combination punches" kind of policies scientifically and strengthen policy coordination and cooperation in finance, currency, investment and so on. We shall effectively improve active financial policies, fully develop the role of special bonds and support major projects of public interest (hereinafter referred to as "major projects") which have certain proceeds but cannot easily attain commercially compliant financing. Sound monetary policy shall be neither too tight nor too loose. We shall work effectively on the issuance of special bonds and the supportive financing for projects and guide financial institutions to strengthen financial services and guarantee the reasonable financing demands for major projects based on business principles according to laws and regulations.
-- Insist on emphasis on key issues. We shall faithfully select the right projects of special bonds, concentrate funds to support the construction of major projects in progress, make up short boards and drive to expand consumption, give priority to solving follow-up financing for those necessary projects in progress in order to form physical workload as soon as possible and avoid any uncompleted project.
-- Insist on risk prevention and control. We shall understand the current situation from the long-term general trend over time, and insist on the promotion of high-quality development and matching loan borrowing with solvency. Special bonds must be used for major projects having certain proceeds, and the financing scale thereof shall be balanced with project proceeds. Local governments shall strengthen the prevention and control of risks in special bonds and project management. Financial institutions shall carry out independent examination and approval and make decisions prudently based on business principles to firmly prevent and control risks.
-- Insist on the stabilization of expectations. We shall not only reinforce countercyclical regulation of macro policy and actively undertake preemptive adjustment and fine-tuning but also uphold the general tone of seeking stability and progress in order to accurately grasp the degree of macro control, and stabilize and improve market expectations. We must uphold the reform direction of structural delegation and firmly reject policies that would have an economy-wide impact. We shall implement the principles of firm accountability, lifelong accountability and responsibility reverse-checking in the case of the launch of new projects by borrowing hidden debts.
II. Support for the Financing of Special Bond Projects
1. Reasonably specify the standards for the financial support of special bond projects. We shall develop the driving role of special bonds and the market-oriented financing advantage of financial institutions, and push forward the construction of major projects supported by special bonds according to laws and regulations.
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