China Allows Two More Local Gov'ts to Issue Bonds

　　China's State Council has approved the trial of an expanded bond selling program which includes two more local governments.
 
　　Ministry 1 of Finance says local governments in Shandong and Jiangsu will now be allowed to sell bonds directly.
 
　　CRI's Xie Zhao has more:
 
　　Guangdong and Zhejiang as well as the cities of Shenzhen and Shanghai have already trialed the bond selling program.
 
　　Now the coastal 2 provinces of Shandong and Jiangsu have been added to the list.
 
　　Zhao Xijun is Dean of the School of Finance at the RenMin University of China.
 
　　He says the two provinces were chosen due to their economic scales and debt-paying ability:
 
　　"The previous four authorized 3 local governments are located in the south-eastern coastal areas. Their economy is developed with huge revenue compared to other local governments. That means they have higher debt-paying ability. The two added provinces are located in coastal areas as well and the scale of their economic output is relatively 4 huge. Their economic development and their revenues are top across the country. So their debt-paying ability is strong."
 
　　Huo Zhihui is a senior analyst 5 at China Credit Rating Co.Ltd. He says compared to huge local government debt, the current scale of local governments issuing bonds is too small:
 
　　"The financing demand for local governments is relatively large, because their financial funds cannot meet the demand of the public's livelihood 6 expenditures 7, including infrastructure 8 construction. To some extent, the trial program can ease the current situation. But it has little effect."
 
　　It has been reported some local government debt totals as much as 10-trillion yuan since 2008.
 
　　Zhao Xijun at RenMin University of China is warning that the bond issued by each of the local governments cannot exceed quota 9 limits set by the State Council, in order to fend 10 off the risk.
 
　　"Considering the possibility of paying-debt in this trial program and the possibility of whole local governments' paying debt, the State Council has set the quota limit.
 
　　The quota of issued bonds should be limited by the local government's ability to repay debt. Then, each government can pay the debt independently and the debt will not affect other related departments and other local governments."
 
　　However, Zhao has emphasized that in the trial program the central government will offer guarantees for local governments if they cannot repay their debts on time.
 
　　He says the central government should have up-to-date information on which local governments have debts or other potential risks.
 
　　For CRI, this is Xie Zhao.