China to Beef up Investment with Bond Money in 2002

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Last updated at: (Beijing Time) Tuesday, December 04, 2001

China to Beef up Investment with Bond Money in 2002

China will continue to expand investment by channeling the money from treasury bond issuance to the construction of large-scale infrastructure projects next year. The money will mainly be used in key infrastructure projects such as the Qinghai-Tibet Railway, water diversion from southern China to northern China. It will also be used to encourage technological upgrading of Chinese enterprises.

China to continue to expand investment on infrastructure projects

China will continue to expand investment by channeling the money from treasury bond issuance to the construction of large-scale infrastructure projects next year.

Zeng Peiyan, minister in charge of the State Development Planning Commission (SDPC), told the on-going national planning meeting that China will complete a group of construction projects funded by T-bond money by the end of 2002. At the same time, the country will start a number of new large-scale projects that involve huge investment, he said.

The Chinese government will spend an even larger amount of T-bond money on construction projects in the first half of next year so as to stimulate economic growth in the face of the global slowdown, according to Zeng.

He said that government funds will flow faster than usual into the investment market in early 2002.

Investment mainly used in key infrastructure construction

According to the SDPC, the money will mainly be used in key infrastructure projects such as the Qinghai-Tibet Railway, water diversion from southern China to northern China, water resources conservation in Beijing, and artery highways in western areas of the country. The money from issuing T-bonds will also be used to encourage technological upgrading of Chinese enterprises.

Zeng said that major projects to be completed by the end of next year include dams, build up of a clean drinking water supply, reconstruction of power grids in rural areas, construction of roads, upgrade of public utilities in cities, harnessing big lakes and rivers, setting up blood banks, providing Internet access in universities, renovating grain storage facilities, building tourist infrastructure in western areas, reconstruction of outdated school buildings and buying equipment for law enforcement agents.

Channels to gather investment

He said the country will level the playing field for non-governmental investors in terms of policies, investment scope, funding channels, taxation, service and management.

He said the government will continue to sort out and eliminate irrational limits to non-governmental investment.

Public facilities in cities such as water supply, roads, bridges and wastewater treatment will be open to private investment next year. The government will also begin to establish a rational pricing and taxation system to guide non-governmental investment in these fields.

Zeng said the government will encourage non-state-owned enterprises to raise funds directly from the international market.These enterprises will enjoy equal chances to receive soft loans from other countries.

Meanwhile, the government will explore the practice of allowing industrial funding to get money directly from the capital market, Zeng said.

China's T-bond

The Ministry of Finance in this July invited both institutional and individual investors to bid for the 16 billion yuan (US$1.9 billion) worth of 20-year treasury bonds on the country's stock exchanges in Shanghai and Shenzhen.

It is the second time that the finance ministry issued long-term (more than 10 years) treasury bonds since the founding of new China, following the issuance of 12 billion yuan (US$1.4 billion) worth of 15-year bond on June 6 this year.

The issuance of long-term bonds suggests an improved financial regulatory ability of the Chinese governme.

The issuance will be a strong financial guarantee for solutions to major problems in China such as social welfare system building and state-owned share reduction.

An earlier report said China issued 360 billion yuan (US$43.5 billion) in treasury bonds between 1998 and 2000, most of which carried terms between 1 and 10 years.

The money was used to support farming and forestry, water conservancy, urban infrastructure, power grids, national grain depots and urban housing projects for low-income residents.

Statistics show money from the treasury bonds flowed into 6,220 projects, drawing total investment of 2,400 billion yuan (US$289.9 billion) during the 1998-2000 period.

The treasury bonds contributed 1.7 percentage points to the country's economic growth rate in 2000, compared to 1.5 in 1998 and 2 in 1999.

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