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China Allows Local Governments to Determine Debt Maturity Structure

By Cheng Siwei and Denise Jia / May 01, 2019 12:25 AM / Finance

Photo: VCG

Photo: VCG

China’s Finance Ministry will allow local governments to determine the maturity structure of local government bonds this year instead of making the decision at the top.

In an opinion document on the issuance of local government bonds released Tuesday, the Finance Ministry asked local governments’ finance departments to “scientifically” determine the maturity date of special purpose bonds through gradually increasing the proportion of longer-term bond issuance to better match project funding needs and deadlines.

For general bonds, local governments should “reasonably balance” the issuance scale of each maturity to meet the demand of more types of investors, the Finance Ministry said.

Special purpose bonds differ from general bonds in that they are repaid from returns on projects instead of by the government.

The requirement is significantly more relaxed than before. According to documents released in May 2018, the annual issuance of 7-year and longer-term general bonds and special bonds should not exceed 60% of the total issuance of all bonds, and the issuance of bonds longer than 10 years should be less than the size of 2-years bonds.

The ministry also asked local governments to complete issuance of all new bonds scheduled for 2019 by the end of September.

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