China Growth Model At the Limit

Caixin: Over 50 Billion Yuan Raised by China’s Local Governments Left Idle

The National Audit Office found that some 50.4 billion yuan ($7.1 billion) of funds local governments raised from new special-purpose bonds (SPBs) went unused last year, including 13.2 billion yuan that had been left idle for over a year, after it examined the books of 18 provincial-level governments and 36 of their cities and counties. Hu Zejun, head of the audit office, delivered the findings in a report (link in Chinese) to lawmakers on Thursday.

SPBs are a kind of local government debt that funds commercially viable infrastructure and public welfare projects, generally repaid with income generated from the specific projects they fund. Unlike “general bonds,” another kind of debt, they are usually not allowed to be repaid from government fiscal revenue.

The audit office attributed the idle funds to unreasonable project management and suspension of some projects. But some analysts say one key factor may be that local governments had trouble finding enough valuable infrastructure projects to invest in.

The good news is they invested it. The bad news is the government is pushing for more infrastructure in 2020.