On November 8, the 12th session of the 14th National People's Congress (“NPC”) Standing Committee approved the State Council’s proposal on raising local government debt quota for replacing existing hidden debt (“the proposal”). The proposal calls for reinforced accountability of local authorities and a 6-trillion-RMB local government debt quota to be added for replacing existing hidden debt. For this fiscal stimulus to be implemented smoothly and make an impact as soon as possible, the new debt quota, all arranged for special debt issuance, has been approved as a whole package and will be used within three years.
Accordingly, the local government special bond quota by the end of 2024 would increase to 35.52 trillion RMB from the previous 29.52 trillion RMB. In addition, the Minister of Finance announced a plan to set aside 800 billion RMB per annum from the proceeds of newly issued special bonds in 5 straight years starting from 2024, which would be aimed solely at resolving debt and expected to replace 4-trillion-RMB hidden debt in total. This, combined with the lately approved 6-trillion-RMB quota, has expanded the overall fiscal resources to 10 trillion RMB for relieving local governments’ debt burden.
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