New | China’s Finance Ministry issues rules on issuing local government bonds

China’s Finance Ministry has issued rules governing the issuance of general local government bonds in a bid to strengthen management of local debt that has fuelled concern about default risks.

The move is an important step leading to expansion of a pilot trial programme on municipal bonds issuance, currently limited to just 10 local governments including Beijing, Shanghai and Guangdong.

General local government bonds refer to bonds that are backed by non-profitable projects issued by provincial or municipal governments and must be repaid using fiscal revenues, the ministry said on its Website.

The bonds would carry terms of at least one year and at most 10 years. Local governments are responsible for issuing and repaying them.

The ministry said it will also issue rules governing specific local government bonds issuance later, which are linked to projects that can generate returns.

After a credit-fuelled massive investment growth since the 2008 global financial crisis, local government debt on mainland China surged to 17.9 trillion yuan (HK$22.7 trillion) at the end of June 2013, a National Audit Office report showed earlier.