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Local works bonds on the rise

By Wang Fei’er  (Global Times)

08:45, October 11, 2012

Local government-backed construction firms in China have issued 471.37 billion yuan ($74.95 billion) worth of bonds to fund urban construction projects during the first nine months of this year, surpassing the 425.74 billion yuan they extended over the entirety of 2011, according to a report released Wednesday by Wind, a financial data provider.

The rapid increase in debt securities placed by construction firms operating under the umbrellas of financing vehicles run by provincial and city governments highlights Beijing's efforts to help local governments meet their growing credit demands and lower the bad loan dangers facing banks, experts told the Global Times Wednesday.

To combat China's slowing economy, authorities in Beijing have been pushing forward infrastructure works projects to keep the country's growth engine on track, even though this strategy has called for a massive initial outlay of investment funding from local governments, Shi Lei, the deputy manager of Ping An Securities' fixed income department, told the Global Times.

During the first nine months of this year, the National Development and Reform Commission (NDRC), the country's top economic planner, gave the green light to more than 5.02 trillion yuan in infrastructure projects, nearly double the amount it approved during the same time last year, NDRC data show.

At the same time, Beijing has also been working to diversify local governments' funding channels over the last year in order to ease their dependence on bank loans, especially as financial regulators and investors become more concerned about the growing bad loan risks facing the country's retail banks, Nie Riming, a research fellow at the Shanghai Institute of Finance and Law, told the Global Times.

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