China to use policy-based, developmental financial instruments to support major projects, expand work-relief programs in key projects

BEIJING, June 30 (Xinhua) -- China will adopt policy-based and developmental financial instruments to support the development of major projects, in an effort to expand effective investment and spur employment and consumption, according to the decision made at the State Council's Executive Meeting chaired by Premier Li Keqiang on Wednesday.

The meeting highlighted the need to implement the prudent monetary policy to good effect, better harness structural monetary policy tools, and boost the capability of the financial sector to serve the real economy, so as to keep overall economic performance stable, and to secure employment and people's livelihoods.

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.

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.

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

The meeting decided to employ policy-based and developmental financial instruments with a combined scale of 300 billion yuan (about 44.7 billion U.S. dollars) by issuing financial bonds. The funds are designed to replenish the 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 the banks as appropriate for the actual equity investment made under the funds. Financial institutions will be guided to enhance supporting 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 in generating more actual economic gains as quickly as possible," Li said.

The meeting also decided to expand public works programs in key projects, in an effort to create more jobs and increase the income 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 in the building of supporting facilities under key projects. The share of work remuneration in the 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 remunerations be paid on time and in full.

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

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