China’s relaxed rules on special-purpose bonds for infrastructure projects don’t apply to riskier public-private partnership (PPP) projects, a person close to the Ministry of Finance told Caixin.
That clarification may dash optimistic speculation sparked by a recent document issued by China’s central government allowing local governments to use proceeds from special-purpose bonds for certain infrastructure investments.
According to the document issued Monday by the cabinet, local governments can now use special-purpose bonds to raise project capital for major and strategic investments in highways, railways and electricity and gas projects.
The document requires that such infrastructure projects be physical projects funded directly by local governments. Those are not the same as PPP projects, which are often implemented through a special-purpose vehicle (SPV), the person said.
To prevent the new policy from being abused, the Ministry of Finance will launch a platform for the disclosure of local government debt information in the next couple of months, the person close to the ministry said. All projects eligible for special-purpose bonds will be published on the platform, the person said.
The central government has been tightening PPP regulations since 2017 as Beijing has grown increasingly concerned that some local governments are using PPP programs as disguised channels for raising debt.