The State Council on May 15 issued a plan to continue providing financial support for local-government financing vehicles for the construction of ongoing local projects.
To boost the economy and prevent financial risks, the State Council set a few targets in the plan: continuing financial support for ongoing projects; regulating procedures for extra financing support; improving financial management of ongoing projects; and improving support measures.
To continue financing support for local projects, banks and financial institutions are required to continue lending to financing vehicles which signed contracts that had not expired by December 31, 2014 and have received part of the loans.
For expired contracts which were signed before December 31, 2014, if profits of the projects cannot cover interest, based on the principles of consistent obligations and appropriate loan terms and collateral, banks and financial institutions can coordinate with local governments and financing vehicles to revise the loan terms.
To continue and complete construction of the ongoing projects, private funds can be used along with government capital. For projects which require more financing support, the joint use of government and private capital will be a prioritized approach. When the joint use of government and private capital is not applicable, local governments can issue bonds in accordance with laws and regulations.
To raise industrial development, banks and financial institutions are required to standardize credit management to improve risk identification and management and ensure loans go to farming and irrigation facilities, affordable housing and urban railway systems.
For regions where local governments are authorized to issue bonds, expenditure, local governments will be able to use available funds to make up for capital shortages in projects launched by financing vehicles before issuing bonds.