On Breakingviews – China infrastructure bump comes at steeper cost, says cbeddor:
An employee seals a stack of yuan banknotes at a branch of Industrial and Commercial Bank of China in Huaibei, Anhui province April 6, 2011. Chinese inflation may top an annual rate of 6 percent in the coming months, preventing any relaxation of monetary tightening, the official China Securities Journal said on Wednesday, a day after the central bank raised interest rates for the fourth time since October. REUTERS/Stringer CHINA OUT.
According to an announcement last week, local governments will be allowed to use some proceeds from “special bonds” as equity capital in major projects. The government usually requires a minimum of 20% of total infrastructure financing be equity, and the rest can be debt. Special bonds could previously only be used for the latter. Moving some of the bonds into the capital column, as the new rules should, theoretically frees project financiers to borrow more from banks and private investors.
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