China’s central government is pushing local governments to issue the remaining RMB 1.51 trillion ($220 billion) of new special-purpose bonds that are intended to spur the economy by the end of October — and they can’t use the borrowings for just anything, reported Caixin.
In a notice issued Wednesday, the Ministry of Finance published a list for how the money from special bonds can’t be used. The negative list includes replacing existing debt, funding white elephant projects, paying wages and pensions, buying land and investing in real estate projects.
The document reiterates that the funds from new special bonds must be used for public welfare projects that generate income. The amount of financing should be balanced against expected revenue. Such projects include transportation infrastructure, energy, agriculture, forestry, water conservancy, ecological and environmental protection projects, livelihood services, temperature-controlled supply chain facilities, municipal administration and industrial park infrastructure, the ministry said.
In this pandemic-plagued year, the central government authorized local governments to borrow 74.4% more for special projects than last year, increasing the allotment to RMB 3.75 trillion for 2020 from RMB 2.15 trillion in 2019. As of July 14, RMB 2.24 trillion of such special bonds were issued.