(Yicai) Oct. 25 -- The Chinese central government will issue additional government bonds worth CNY1 trillion (USD136.8 billion) to support various provincial-level regions’ disaster prevention and relief capabilities in the fourth quarter of the year.

The State Council will raise the funds by issuing such government bonds and then transfer them to local governments, according to a decision approved yesterday by the Standing Committee of the 14th National People’s Congress, China’s top legislative body. Half of the proceeds are expected to be used this year, while the remaining half will be carried over to next year.

Local government will use the funds in eight major areas, including rebuilding disaster-hit areas, key flood control projects, natural disaster emergency capacity improvement, and urban drainage and waterlogging prevention and control, Xinhua reported yesterday.

The Standing Committee of the 14th NPC also hiked this year’s fiscal budget deficit to CNY4.88 trillion from CNY3.88 trillion, with the corresponding deficit ratio expected to rise to around 3.8 percent from 3 percent.

The difference from previous special government bonds is that the funds that will be raised this time will reach local governments via transfer payment, meaning that they will be eventually repaid by the central finance so local governments can use them free of charge, Feng Qiaobin, deputy secretary-general of the Society of Public Finance of China, told Yicai.

China’s economic recovery post Covid-19 is facing challenges as local governments’ capability of boosting investment is insufficient because of the impact of debt-related pressure, Feng noted, adding that the transfer payment of CNY1 trillion will partially restore local governments’ investment capability to achieve the goal of stabilizing economic growth.

Chinese local governments’ revenue from the sale of land use rights has been declining since the beginning of the year because of the general downturn in the country’s real estate market, ultimately curbing fiscal expenditure, Luo Zhiheng, chief economist at Yuekai Securities, told Yicai. The additional issuance of central government bonds and the adjustment of the budget deficit at this time of the year will help implement the proactive fiscal policy, Luo added.

China’s general public budget revenue, which makes up most of the country’s fiscal revenue, rose 8.9 percent to CNY16.7 trillion (USD2.3 trillion) in the first three quarters of the year from a year earlier, according to data released by the Ministry of Finance yesterday. Meanwhile, the government fund budget revenue, which includes income from land use right sales, slumped 15.7 percent to CNY3.9 trillion.

Editor: Dou Shicong, Futura Costaglione