China's Legislators consider local gov鈥檛 bond issuance

Feb. 18, 2009 (China Knowledge) - Chinese legislators yesterday reviewed a proposal to permit local governments to issue bonds to fund the RMB 4trillion (US$586 billion) stimulus package at the 18th meeting of the chairman and the vice-chairpersons of the Standing Committee of the 11th National People's Congress.

Local governments are not allowed to issue bonds directly under China's budget law. But they are expected to contribute a substantial proportion of the RMB 4 trillion stimulus package announced last November.

The slowdown in economic growth, especially the plunge in land sales, means that local governments have little fiscal surplus for their part of the stimulus package.

It is reported earlier that the central government will allow local governments to issue RMB 200 billion in bonds.

China posted a deficit of RMB 111 billion in 2008, and its fiscal revenue in January plunged 17.1% to RMB 613 billion from a year ago, due to economic slowdown, falling corporate profit and tax cuts.