China is planning to permit local governments to directly issue bonds to fund essential projects, the official Xinhua News Agency reported Monday.
The Standing Committee of National People's Congress is reviewing the draft revisions on the budget law. According to the draft law, local governments will be able to issue bonds within a quota set by the State Council.
The fund so raised could be used to partly finance construction investments that have been included in the provincial-level governments' general public budget plans. No other forms of debt raising would be allowed under the draft.
The central government currently issues bonds on behalf of some local authorities. China's highly indebted local governments has raised concerns about the possible systemic risk.
Local government debt surged more than 60 percent from end-2010 to around CNY 18 trillion at the end of June 2013.
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