Funding to be more policy based

China will adopt policy-based and developmental financial instruments to support major projects amid efforts to expand effective investment and spur employment and consumption, according to a decision made at the State Council's Executive Meeting chaired by Premier Li Keqiang on Wednesday.

It was noted at the meeting that policy-based, developmental financial instruments are designed to increase financing support for major projects by playing a greater guiding role, without resorting to massive stimulus or excessive money supply maneuvers. They will serve to improve the transmission mechanism of monetary policy, better match bank deposits and loans in size and structure, and deliver the combined effects of boosting investment, consumption and employment.

"Policy-based and developmental financial instruments will be utilized to guide the financial sector toward greater support for the real economy," Li said.

It was decided at the meeting to employ policy-based and developmental financial instruments with a combined scale of 300 billion yuan ($44.8 billion) by issuing financial bonds. The funds are designed to replenish capital for major projects such as new infrastructure without exceeding half of the total investment, or to bridge financing for projects funded by special-purpose bonds.

Fiscal and monetary policies will work in tandem. The central government will give a two-year interest subsidy to banks in line with the actual equity investment made using the funds. Financial institutions will be guided to enhance supportive financing, attract private investment and generate more actual economic gains as quickly as possible.

"Many of the key projects identified by both central and local governments are infrastructure projects including new types of infrastructure. Setting up such investment funds will help spur local governments to generate more actual economic gains as quickly as possible," Li said.

It was also decided to expand public works programs in key projects in an effort to create more jobs and increase incomes of rural migrant workers. While ensuring quality and safety, key projects invested by the government should prioritize the use of public works programs.

A set of public works programs funded by central budgetary investment will be launched to help build supportive facilities related to key projects. The share of work remuneration in central budgetary funding will be increased from the previous 15 percent to over 30 percent.

Requirements will be specified for project preparations, construction and other stages. Steps will be taken to ensure that work remuneration is paid on time and in full.

The meeting stressed that despite the remarkable achievements made in transportation sector development, China still has quite a low density of transportation networks by population. Greater efforts are needed to strengthen areas of weakness to spur consumption and employment as well as better underpin economic and social development.

A number of new projects will be launched this year to connect national expressways, remedy congested sections of provincial highways, develop inland waterways and upgrade port functions. Financial institutions will be encouraged to provide long-term, low-interest loans.

wangkeju@chinadaily.com.cn