Local governments in China will now be required to issue highway bonds rather than bank loans for the construction of toll roads, according to a circular jointly issued by the Ministry of Finance and the Ministry of Transport (MOT) on July 12, 2017.
According to the announcement, the bonds will serve as an exclusive funding mechanism for governments at all levels intending to build highways.
Following the establishment of land reserve bonds last month, the new bonds mark the country's continuous efforts to develop new financial avenues for local governments to facilitate infrastructure construction.
According to a new budgetary law issued in 2015, local governments are not permitted to receive bank loans other than through government authorized bonds. This was a government attempt to supervise and reinforce the security of local finance while ensuring that investment levels are maintained for regional development.
According to the MOT, by the end of last year, there were 171,100 kilometers of toll roads in China, among which 100,500 kilometers had been constructed by indebted local governments.
After the new policies, provincial governments, responsible for the financing of the constructions of toll roads, will incorporate into their budgets the revenues, expenditures, payback, interest payments and the issuance fees of the bonds.
The bonds for toll roads will prioritize the construction of strategic infrastructure such as the super highways for the Belt and Road initiative, the synergy of Beijing, Tianjin and Hebei Province and the Yangtze River Economic Belt.
The funding should not be embezzled for non-highway construction, road maintenance or for organizational or personal use.