China mulls allowing local gov'ts to issue municipal bonds

Jul. 7, 2009 (China Knowledge) - China is considering permitting local governments to sell municipal bonds to help finance urban infrastructure construction, said Zhou Xiaochuan, governor of the People's Bank of China (PBOC), at a conference in Beijing on Saturday.

New regulations are under discussion, said Zhou, adding that he personally supports the idea of letting local governments issue municipal bonds.

Zhou said that the local governments want to issue bonds because they lack the money to fund accelerated urban construction.

The issuance of municipal bonds would help solve two urgent problems, one of which is the tendency of new local administrations to ignore existing debts, and the other of which is the lack of rating services on local government bonds, said Zhou.

China's Ministry of Finance (MOF) said earlier that this month it will complete the issuance of RMB 200 billion in local government bonds intended to help finance local governments under the RMB 4-trillion economic stimulus package announced last November.