August 26, 2024 (InvestinChina.asia) – China’s Ministry of Finance and five other departments have introduced stricter regulations to prevent illegal borrowing for municipal infrastructure projects with no or insufficient returns. The new measures aim to strengthen budgetary discipline and curb government debt risks.
Key Points
No Unlawful Borrowing
- Restrictions on Debt: The new rules prohibit unlawful borrowing for municipal infrastructure assets that lack sufficient revenue.
- Avoiding Hidden Debt: The measures are designed to avoid adding to the country’s hidden debt.
Budget Discipline
- Funding Sources: Municipal infrastructure projects must have a clear funding source and follow basic construction approval procedures.
- Budget Constraints: The regulations emphasize the importance of budget constraints to manage government debt risks.
Repayment Priorities
- Bond Repayments: Revenue generated from the use of infrastructure built with local government special bonds must be used primarily to repay the principal and interest on those bonds.
- No Misuse of Funds: There is a strict prohibition against diverting these funds for other purposes.
Asset Management
- Full Reporting: The asset management situation for municipal infrastructure must be fully reported, ensuring complete coverage and accuracy.
- Regular Supervision: Financial and administrative departments will conduct periodic or ad hoc supervisions to ensure compliance.
Effective Date
- Implementation: The new regulations will take effect on September 1, 2024.