domestically rated “AAA”, the safest level. The sale to individual investors is mainly of project-link
ed special-purpose bonds, a type of local government bond vigorously promoted by the government in re
cent years. The cash flows generated from the underlying projects will be used as the primary repayment sources.
In China, there are two types of local government bonds: general bonds and special purpose bonds. According to the country’s 2019 budget repor
t, which was approved by the top legislature earlier this month, the budgeted deficit for local governments is 930 billion yuan, up 100 billi
on yuan compared with 2018, and this fund gap will be supplemented by general bonds.
In the meantime, 2.15 trillion yuan of special purpose bonds will be issued to support la
rge infrastructure projects, such as shantytown renovation projects and railways, said the ministry.
Letting individual buyers invest in local government bonds is a way to narrow the government’s financin
g gap, said Hu Yijian, a tax professor at Shanghai University of Finance and Economics. The gap is expected to expand, as policym
akers decided to cut about 2 trillion yuan in taxes and fees this year while at the same time increase spending on investment.
entered a new era of moderately slowing expansion and a transition to a high-quality grow
h model. That has pushed economists to reconsider some long-term issues, such as whether the economy wo
uld cool down sharply before a considerable rise in wealth, especially after a period of fast growth.
“The key method to ensure China’s role as a high-income cou
ntry is to adjust industrial structures and promote productivity,” said Zhu Min, an inf
luential Chinese economist and former deputy managing director at the International Monetary Fund.
High-tech manufacturing, the service industry and the digital economy will be the new engines
for the economy, while some traditional driving forces, such as injecting funds into the market, are losing momentum, Zhu said.
China’s total GDP exceeded 90 trillion yuan ($13.4 trillion) in 2018, and the per cap
ita GDP was about $9,700. Economists predict that if the country maintains growth of at least 6 percent th
is year, which is likely given the current momentum, its per capita GDP this year would surpass $10,000.