(Bloomberg) -- China is allowing local officials to invest in more areas with a key government bond while also simplifying its approval process in a bid to make better use of an important source of public funding to drive the economy.
Local governments can use their special bonds to invest in projects as long as they’re not on a special list published by the cabinet, the government said in a document Wednesday. That list includes projects that don’t generate any returns, government buildings, vanity constructions like giant sculptures and commercial property.
Eleven regions, including some of the biggest provincial economies like Guangdong, will be allowed to approve the projects funded by the bonds. In the past, all localities needed to get approval from the nation’s top economic planning agency and Finance Ministry before selling the bonds.
China’s top leaders has placed boosting domestic demand as their top priority for economic work in 2025 because the robust growth of exports is threatened by a potential second trade war with the US. Government investment remains a key lever to drive growth even after Beijing pledged more focus on consumption because people’s willingness to spend remains sluggish.
Local government special bonds have grown to become a key source of funding for infrastructure projects over the past decade. But regions increasingly struggle to find suitable projects that meet Beijing’s criteria as investment returns declines across the economy. Sales of local government bonds were slow this year, meaning weakened support for growth.
The State Council guidelines also allowed the bonds to make up a greater proportion of a project’s overall investment when used as equity capital. More areas including information technology, elderly care and childcare are eligible for investment.
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