Chinanews.com, November 11 According to the Ministry of Finance website news, the Ministry of Finance recently issued the "Opinions on Further Doing a Good Job in Local Government Bond Issuance" (hereinafter referred to as the "Opinions").
The "Opinions" clarified that local financial departments should strengthen the management of the whole process of special bond projects, and monitor the "borrowing, use, management, and repayment" of special bond projects on a case-by-case basis to ensure debt repayment at maturity and prevent repayment risks.
Data map: Ministry of Finance.
Photo by Kang Yafeng issued by China News Service
The "Opinions" pointed out that the local debt issuance mechanism should be continuously improved and the level of marketization of issuance should be improved.
Local financial departments, members of local debt underwriting syndicates, credit rating agencies and other third-party professional institutions shall further strengthen their awareness of marketization, do a good job in local debt issuance in accordance with the principles of marketization and standardization, and actively promote the development of the local debt market.
The "Opinions" put forward that the scientific design of the local bond issuance plan should maintain the smooth operation of the bond market.
The local financial department should scientifically design the local debt issuance plan, reasonably select the time window for issuance, and appropriately balance the pace of debt issuance according to factors such as the progress of bond issuance, the need for the use of fiscal expenditures, the level of treasury funds, and the bond market, so as to ensure the needs of project construction. It is also necessary to avoid long-term retention of bond funds in the treasury.
The "Opinions" require optimizing the term structure of local debt and reasonably controlling the cost of financing.
The local financial department shall make an overall consideration of the construction of the yield curve of local government bonds, project duration, financing costs, distribution of maturing debts, investor demand and other factors to scientifically design bond maturities.
The term of local debt is 1 year, 2 years, 3 years, 5 years, 7 years, 10 years, 15 years, 20 years, and 30 years.
Local governments are allowed to adopt different methods of repaying the principal, such as repayment at maturity, early repayment, and repayment of the principal annually.
The "Opinions" clarified that the evaluation of local debt issuance projects should be strengthened to prevent repayment risks.
Local financial departments should strictly review the compliance review and risk control of special bond projects, strengthen the evaluation of the projects to be issued, effectively guarantee the quality of the projects, and strictly implement the requirements for the balance of payments.
The local financial department should strengthen the management of the whole process of special bond projects, and monitor the “borrowing, use, management, and repayment” of special bond projects on a case-by-case basis to ensure that debts are repaid at maturity and prevent repayment risks.
The "Opinions" mentioned that the information disclosure and credit rating of local government bonds should be improved to promote the formation of a market-based financing constraint mechanism.
The local financial department shall disclose the local government bond issuance plan for the next month in the region before the 20th of each month, and the local government bond issuance plan for the next quarter in the region before March, June, September and December 20.
Credit rating agencies should standardize the development of local debt credit ratings, continuously improve the credit rating indicator system, and disclose to the outside world.
When conducting special bond credit ratings, it is necessary to fully evaluate the project quality, income and financing balance, etc., to promote the rating results to reasonably reflect the differences in the projects, and to improve the effectiveness of the rating results.
The "Opinions" will be implemented from January 1, 2021.
The "Opinions of the Ministry of Finance on Doing a Good Job in the Issuance of Local Government Bonds" (Caiku [2019] No. 23) issued by the Ministry of Finance on April 25, 2019 is still valid. Any inconsistency with these opinions shall be implemented in accordance with these opinions.