China local govts issuing bonds

BEIJING: China will allow local governments to sell bonds to ease funding strains on low-cost housing projects, the official Shanghai Securities News reported on Tuesday.

Economic planning agency the National Development and Reform Commission (NDRC) had decided to allow qualified local governments to sell bonds via their financing vehicles, the newspaper said.

Bond issuance would help ease cash shortages facing affordable housing, or subsidised apartments for middle- and low-income families, it reported.

Beijing has pledged to start construction of 10 million affordable housing units in 2011, but only about a third had been started as of June as local governments were short of funds, with banks tightening belts and land revenue plunging.

Building 10 million apartments, a key political goal, would cost at least 1.3 trillion yuan ($201 billion), of which the central government will provide only 10 percent.

The central government also told local governments to use 10 percent of their land deal revenue for the subsidised housing, but it remains unclear where they will find the rest funding.

Copyright Reuters, 2011