China’s financial regulators plan to cut reserve requirement rules for commercial banks buying bonds issued by local governments as Beijing looks to jump-start a slew of new infrastructure projects to boost growth, the South China Morning Post reports.
Banks are currently required to hold at least 20% of the value of any local government bonds they buy as a way of insuring themselves against possible defaults, but Beijing plans to scrap this rule to make it easier for banks to buy up larger amounts of this kind of debt.
Local governments have been told to issue a huge number of bonds—possibly worth a combined Rmb 800 million ($116 million)—over the next two months, which will finance local infrastructure projects including roads, subways, shantytown redevelopment and sewage disposal plants.
The move is designed to stimulate the Chinese economy, which has showed signs of slowing this year amid attempts by Beijing to reduce financial risk.