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China lowers capital ratio requirement for some infrastructure projects

[BEIJING] China will lower the minimum capital ratio requirement for some infrastructure investment projects, state television CCTV said on Wednesday, citing a Cabinet meeting chaired by premier Li Keqiang.

The mininum capital investment ratio for ports and shipping infrastructure projects will be lowered to 20 per cent from 25 per cent, while that for highways, railways, environmental protection and social services infrastructure projects can be decided on a case-to-case basis, with the decrease capped at 5 per cent.

Typically, infrastructure projects are financed by both equity and debt, but they need to meet a minimum equity ratio requirement prior to leveraging up through borrowing.

In addition, up to 50 per cent of this minimum capital investment can be raised through equity financing, said the statement.

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The National Reform and Development Commission, China's state planner, had said in August it would be lowering the minimum capital ratio requirement for some projects in order to "reasonably expand effective investment."

China's fixed asset investment grew 5.4 per cent from January-September, slowing from the 5.5 per cent in the first eight months. Data for the first ten months will be published on Thursday.

Many local governments are facing increasing fiscal strains as the tax cuts and the broader economic slowdown reduce their revenues, hampering their ability to carry through on big infrastructure projects which Beijing is counting on to revive growth.

China's third-quarter economic growth slowed to its weakest pace in almost three decades. 

REUTERS