April 5, 2018 / 8:29 AM / a year ago

China launches local govt bonds to finance rundown areas - Xinhua

SHANGHAI, April 5 (Reuters) - China has launched a pilot program that allows local governments to issue bonds to finance the rebuilding of rundown areas, the official Xinhua news agency said on Thursday.

The new channel relieves financing pressure for local governments after they were banned from borrowing via murky local government financing vehicles, an off-balance-sheet form of lending. Renovations financed via the bonds should bring in sufficient revenue to repay the principal and interest, the finance ministry said, according to Xinhua. These bonds are similar to land reserve bonds and toll road bonds introduced last year, said Xinhua. The program reduces credit risks, Xinhua quoted Qiao Baoyun, head of the academy of public finance and public policy under the Beijing-based Central University of Finance and Economics as saying. China aims to renovate 5.8 million homes in 2018. (Reporting by Engen Tham; Editing by Biju Dwarakanath)

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