18/07/2019 17:45

Central support for transportation sector positive for RLGs

[ET Net News Agency, 18 July 2019] Moody's Investors Service said in a new report that
China's (A1 stable) increased central government support in the transportation sector is
credit positive for both transportation issuers and regional and local governments (RLGs),
and will help address the disparity in regional funding gaps.
"The central government's increased oversight in the sector, coupled with its financial
support for strategically important transportation projects, should lead to more balanced
transport infrastructure development across China," said Ada Li, a Moody's Vice President
and Senior Credit Officer.
On 10 July, China's State Council announced a plan to define the fiscal power and
expenditure responsibilities of central and local governments in the transportation
The notice is part of a series of social responsibility shifts between central and local
governments, starting from 2019, covering social welfare, healthcare, foreign affairs,
national security, education, and science and technology development.
"The new policy also provides more clarity about the role of the central government and
the availability of timely funding support, and will thus improve funding access and lower
funding costs for strategically important transportation projects," added Li.
The more explicit financial support from the central government will in particularly
benefit less developed regions, which until now struggled to obtain funding from banks and
bond investors due to concerns over the ability of RLGs and their own infrastructure
companies to provide timely capital injections or other financial support.
According to the State Council's notice, the central government will centrally manage
the planning, policy and monitoring of the transportation sector, while RLGs and their
owned enterprises will be responsible for the execution, such as construction, maintenance
and operation.
The central government will also make additional financial contributions to transport
infrastructure, with some national motorways, border checkpoints, major canals and public
service railways to be financed by the central government.
In the first five months of 2019, total transportation investment increased 7.3%
year-on-year to RMB1 trillion, while RLGs' general budgetary revenues grew by only 3.9%
and government fund revenues declined by 4%. (KL)

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