Seize the policy dividends and start planning projects ahead of time—implementation plans for new policy-based financial instruments are expected to be issued very soon!

According to online news reports, several local governments—including those of Guangzhou, Xingtai, and Rizhao—have actively responded to the central government’s deployment by means of policy interpretation, project preparation, and application-training sessions, all in preparation for the upcoming launch of new policy-based financial instruments. Recently, the implementation plans for these new policy-based financial instruments have entered the stage of soliciting public comments; the first batch is expected to be on a scale of... With a total investment of approximately 6 trillion yuan—leveraged at a ratio of 1:8—this initiative, driven by a combination of “special funds + bank loans + special bonds,” could unlock up to 500 billion yuan in funding. This will inject strong momentum into stabilizing growth and promoting development in the second half of the year.

The establishment of this policy tool stems from... The strategic decision proposed at the April 25 meeting of the Political Bureau of the CPC Central Committee—“to create new structural monetary policy tools and establish innovative policy-based financial instruments to support technological innovation, expand consumption, and stabilize foreign trade”—was further clarified by Zhao Chenxin, Deputy Director of the National Development and Reform Commission, at a press conference on April 28. According to Zhao, the new policy-based financial instruments will be used to address the issue of insufficient capital for project construction. The goal is to release the complete list of projects under the “Two Major” initiatives and central budget investments for 2025 before the end of June, while simultaneously advancing the implementation of these new instruments.

 

01

What are the new policy-based financial instruments?

 

The new policy-based financial instrument is a special financing mechanism typically implemented by policy banks through the issuance of financial bonds to raise funds. The National Development and Reform Commission selects the project list, and the Ministry of Finance provides interest subsidies on the loans. It features... The nature of “quasi-fiscal” instruments. This tool both continues the operational model of the policy-based and development-oriented financial instruments introduced in 2022 and introduces innovative upgrades in terms of support direction and functional positioning.

In 2022, in the face of downward economic pressures, China introduced two batches of policy-based and development-oriented financial instruments totaling 740 billion yuan, supporting more than 2,700 projects across multiple critical infrastructure sectors, including transportation, water conservancy, and energy. According to a report by the People's Bank of China, banks have cumulatively extended credit lines exceeding 3.5 trillion yuan to projects supported by these financial instruments. The financial leverage effect and investment-driven impact have been significant, effectively addressing the funding bottlenecks encountered in the construction of major projects.

Compared with the traditional fiscal funding model, the new policy-based financial instruments have the following characteristics:

First, The “quasi-fiscal” nature alleviates pressure on local finances. Zhao Wei, Chief Economist at Shenwan Hongyuan Securities, pointed out: Policy-based financial instruments have two prominent features: First, thanks to fiscal interest subsidies, their lower interest rates ease the interest-payment burden on local governments, enabling them to maintain stable growth while also ensuring the sustainability of local finances. Second, these instruments exhibit a striking “leverage” effect—they can serve as equity capital for investment projects, effectively leveraging credit.

Second, the operating mechanism has become more market-oriented. This tool is led by policy banks and follows... The principle of “independent decision-making, self-responsibility for profits and losses, and self-assumption of risks” will be upheld without increasing local governments’ implicit debt. At the same time, a withdrawal mechanism—such as equity investment and shareholder loans—that effectively functions as “equity in name but debt in substance”—will ensure the sustainable circulation of funds.

Third, the investment areas have become more diversified. In 2022, the tools primarily focused on traditional infrastructure sectors. By 2025, however, the new set of tools will place particular emphasis on three key areas: technological innovation, consumption upgrading, and stable foreign trade. These tools will cover eight major sectors, including the digital economy, artificial intelligence, the low-altitude economy, consumer-sector infrastructure, green and low-carbon transformation, transportation and logistics, municipal and industrial park development—reflecting the high priority attached to economic structural transformation and the cultivation of new growth drivers.

Mingming, chief economist at CITIC Securities, stated: In 2025, the new policy-based financial instruments will not only continue to support traditional infrastructure sectors but will also direct funds precisely toward key areas such as technological innovation, boosting consumption, and stabilizing foreign trade. These instruments will both focus on stimulating short-term demand and aim at fostering long-term economic structural transformation and cultivating new drivers of economic growth.

 

02

Policy Implementation Pathways and Mechanism Innovation

 

The implementation path for the new policy-based financial instrument is clear and well-defined; it adopts... The “Tier-3 Coordination + Green Channel” model enables coordinated collaboration among national, local, and financial institutions.

National level: The National Development and Reform Commission will take the lead in screening the project list and determining the priority support areas and project criteria. The Ministry of Finance will provide interest subsidies on loans to reduce financing costs. The People's Bank of China will, through... PSL (Pledged Supplementary Lending) and similar mechanisms provide low-cost funding to policy banks, supporting the establishment of special-purpose financial instruments.

Local level: Local governments need to focus on key areas of support and reserve projects, refine project feasibility study reports, complete project approval procedures (including project initiation, planning, land use, environmental protection, etc.), and establish inter-departmental coordination mechanisms to enhance approval efficiency.

At the financial institution level: Led by the three policy banks—the China Development Bank, the Agricultural Development Bank of China, and the Export-Import Bank of China—and operated according to market-oriented principles. Based on historical experience, the allocation ratio among these three banks is approximately: 58%, 33%, and 9%—among these, the China Development Bank focuses on the “two foundations and one pillar” (infrastructure, basic industries, and pillar industries) as well as the list of major national- and provincial-level projects; the Agricultural Development Bank prioritizes projects in the “agriculture, rural areas, and farmers” sector, emphasizing its role in supporting and assisting agriculture and rural communities; while the Export-Import Bank concentrates on providing support to the foreign trade sector.

In terms of funding support mechanisms, the new policy-based financial instruments both continue and innovate. The four modes of 2022:

1. Equity investment: Policy banks channel funds into the parent companies of local platform enterprises through their own fund institutions, and upon completion of the project, they exit by selling their equity stakes. This approach can provide long-term financial support for projects and promote sustainable development.

2. Shareholder Loans: Policy banks provide funding to project owners in the form of shareholder loans, and the project owners repay the loans using the revenue generated from project operations. This model requires that the project have stable cash flows and sufficient repayment capacity. In 2022, the first batch of funds totaling 300 billion yuan was allocated to support nearly a thousand projects, leveraging total investments exceeding one trillion yuan.

3. Bridge financing for special bond equity capital: When special-purpose bond funds have not yet been allocated, policy-based financial instruments can be used to provide advance funding, which can then be replaced once the special-purpose bond funds are in place, effectively preventing disruptions in infrastructure financing.

4. Attract complementary financing: By addressing the issue of capital adequacy, we will encourage commercial banks to provide additional loans and other forms of financing support, thereby establishing a diversified financing structure and attracting private capital to participate in project construction.

In addition, In 2025, the new tools also innovatively introduced mechanisms such as the “Tech Board” bond market and REITs exit pathways, further lowering the threshold for corporate bond issuance (or relaxing it to AA-rated companies). This has created a synergistic financing approach combining equity and debt, providing enterprises with more diversified financing options.

 

03

Areas of Support and Key Focus Areas

 

With Unlike the 740 billion yuan policy-based development financial instruments launched in 2022, which focused on infrastructure development, this new set of tools places particular emphasis on supporting three key areas: technological innovation, consumption upgrading, and stable foreign trade. Specifically, it covers 8 major sectors and 28 specialized sub-sectors.

 

Three Core Directions:

In the field of scientific and technological innovation: Focusing on hard-tech sectors such as the digital economy, artificial intelligence, the low-altitude economy, and biopharmaceuticals, we support high-tech industrial parks, research institutions, and innovative enterprises. For example, the Huzhou Artificial Intelligence Project and the Xingtai Specialty Industry Cluster highlight the innovativeness of technologies and their promising prospects for market application.

Expand the consumer sector: Strengthen the development of consumer infrastructure, such as cultural and tourism facilities, charging stations, and commercial systems at the county level. At the same time, promote consumption of cultural, sports, and tourism services to meet the people’s growing demand for a better life. For example, projects like the construction of community-based elderly care service facilities and the development of smart elderly care platforms.

Stabilizing the foreign trade sector: Support cross-border e-commerce platforms, financing for export enterprises, and international logistics hubs, helping foreign trade enterprises address challenges posed by fluctuations in international markets, trade disputes, and exchange rate volatility, and enhancing their risk resilience and international competitiveness.

It is worth noting that the new policy-based financial instruments, while continuing to focus on traditional infrastructure investment, place greater emphasis on fostering new growth drivers. According to projects reported by local reserves, traditional infrastructure sectors such as water conservancy, transportation, and urban renewal still account for a certain proportion (e.g., Henan’s water conservancy projects and Baoji’s railway projects). However, more resources are being directed toward upgrading the technology and industrial sectors, reflecting the strategic intent behind the economic structural transformation.

 

04

Local Government Response Strategies

 

Faced with the opportunities brought by new policy-based financial instruments, local governments should adopt the following strategies to fully leverage these policy benefits and promote high-quality economic development:

(1) Focus on reserve projects in key support areas.

1. In the field of technological innovation: Focus on local high-tech industrial parks, research institutions, and innovative enterprises to identify projects with core technologies and high growth potential. For example, if a region already has a certain industrial foundation in the field of artificial intelligence, it can proactively develop application projects in areas such as AI-powered medical image diagnostics and intelligent upgrades in industrial manufacturing, highlighting the innovation of the technology and its promising market prospects.

2. In the field of consumption upgrading: Combine local cultural characteristics and tourism resources to develop integrated cultural and tourism projects, such as creating culturally themed tourist districts with distinctive local folk customs and comprehensive rural tourism complexes. In terms of elderly care services, prepare for the construction of community-based elderly care facilities and the development of smart elderly care platforms to meet the growing demand for elderly care services.

3. Stable Foreign Trade Sector: For local foreign trade enterprises—especially labor-intensive businesses and suppliers of critical raw materials—reserve projects aimed at industrial upgrading and transformation, such as introducing advanced production equipment to enhance productivity and optimizing supply chain management systems, thereby boosting these enterprises’ competitiveness in the international market.

(2) Properly prepare for the project’s preliminary stage.

1. Refine the Project Feasibility Study Report: Conduct in-depth market research, technical feasibility assessments, and financial analyses on reserve projects to ensure that they are technically viable, economically sound, and financially sustainable. The report must clearly outline key information such as the project’s construction scope, investment scale, funding sources, and anticipated benefits, providing strong support for project application.

2. Complete project approval procedures: Accelerate the processing of preliminary approval procedures—including project initiation, planning, land acquisition, and environmental protection—to ensure that the project complies with national industrial policies and local development plans and meets the conditions for commencing construction. For complex projects involving approvals from multiple departments, establish a departmental coordination mechanism to enhance approval efficiency.

(3) Strengthen communication and collaboration with policy banks.

1. Establish a regular communication mechanism: Relevant local government departments should proactively establish connections with the local branches of the China Development Bank, the Agricultural Development Bank of China, and the Export-Import Bank of China. They should regularly report on project reserves and progress, familiarize themselves with the banks’ project investment standards and requirements, and promptly adjust their project planning and application strategies.

2. Inviting banks to participate in project planning: In the early stages of project pipeline development, invite experts from policy banks to evaluate and provide guidance on projects. Leveraging the banks’ professional strengths, we can optimize project designs, enhance project attractiveness, and improve their financing viability. For example, when planning large-scale cultural and tourism projects, banks can offer advice on aspects such as fund management and market risk control, ensuring that the projects better meet the investment requirements of financial institutions.

(4) Strengthen project performance management.

1. Establish a project performance indicator system: During the project application phase, set forth clear performance goals and indicators, including project construction progress, investment completion rate, economic benefit indicators (such as project return on investment and the number of new jobs created), and social benefit indicators (such as improvements in public service levels and promotion of industrial upgrading).

2. Strengthen monitoring of the project implementation process: Regularly monitor and analyze project performance, promptly identify issues, and take appropriate measures to address them. Establish a system for publicly disclosing project information, accept social oversight, ensure that project funds are used in a standardized and transparent manner, and enhance both the effectiveness of project implementation and the efficiency of fund utilization.

(5) Innovation Project Application and Management Mechanism

1. Digital Application Platform: For example, the Beijing Economic-Technological Development Area has established a “Comprehensive Service Platform for Policy Implementation,” enabling online application, review, and tracking of projects. Local governments should promote the development of similar platforms to enhance application efficiency.

2. Cross-regional collaboration mechanism: Relying on regional cooperation mechanisms (such as the infrastructure connectivity and cross-border investment and financing facilitation policies outlined in the “30 Measures for Nansha Finance” in the Greater Bay Area), we will integrate resources to apply for “dual-purpose” projects involving multiple provinces and cities (e.g., inter-provincial logistics networks, joint industrial parks).

3. Precisely align with bank preferences: Adjust project design according to the investment strategies of policy banks. For example, agricultural development bank-supported rural and agricultural projects must emphasize their “support for agriculture and farmers” nature, whereas the China Development Bank places greater emphasis on “two foundations and one support” and the list of major projects.

 

05

The Synergistic Effect of Policy Dividends and High-Quality Economic Development

 

The implementation of new policy-based financial instruments will accelerate fiscal stimulus in the second half of the year. Currently, the outstanding quota for special-purpose bonds yet to be issued amounts to... 2.77 trillion yuan—the remaining balance of ultra-long-term special government bonds stands at 937 billion yuan. Once the capital constraint is resolved, the physical workload of infrastructure and technology projects will significantly increase, providing strong support for economic stabilization.

Looking at it more deeply, this tool will promote policy coordination and economic structural transformation:

1. Policy Coordination: The new policy-based financial instrument marks a further step toward greater synergy between China’s monetary and fiscal policies, working together to support economic development and thereby forming... "Policy Combo."

2. Economic structural adjustment: By focusing on supporting technological innovation, consumption upgrading, and stable foreign trade, we will drive the economy’s transformation from a traditional growth model to an innovation-driven one. In the context of global economic volatility, this approach will provide strong support for economic stability and enhance the economy’s resilience to risks.

3. Cultivating new growth drivers: Support cutting-edge technology industries such as the digital economy, artificial intelligence, and the low-altitude economy, accelerate the formation of new-quality productive forces, and inject new momentum into high-quality economic development.

4. Promote the expansion of consumption: By strengthening the development of consumer infrastructure and boosting consumption of services such as culture, sports, and tourism, we can stimulate domestic demand and enhance the role of consumption in driving economic growth.

5. Stabilize the foundation of foreign trade: By supporting cross-border e-commerce platforms, financing for export enterprises, and international logistics hubs, we can mitigate the impact of global economic uncertainty on foreign trade enterprises and stabilize the foundation of foreign trade.

From the perspective of investment logic, the new policy-based financial instruments take into account both short-term demand stimulation and long-term economic structural transformation. For example, support for consumer infrastructure not only meets current demands for consumption upgrading but also lays the foundation for emerging business models and new formats such as digital consumption and green consumption in the future. Similarly, support for technological innovation directly serves the cultivation of the nation’s strategic emerging industries and the tackling of key core technologies.

 

06

Conclusion

 

The launch of new policy-based financial instruments is an important measure to address the current economic situation and promote high-quality development. Local governments should deeply understand the policy implications, proactively prepare and submit project proposals, seize the policy benefits, resolve the capital funding challenges faced by projects, and drive local economies toward high-quality development.

From the perspective of implementation progress, the National Development and Reform Commission requires... The list of “dual-track” construction projects for 2025 will be fully issued by the end of June, and new financial instruments will be rolled out concurrently as supporting policies. Currently, local authorities have entered the final sprint phase for project applications, aiming to complete the first batch of allocations by July. It is estimated that the initial batch of 500 billion yuan in financial instruments, serving as equity capital, could leverage approximately 6 trillion yuan in total investment, providing strong support for economic stabilization in the second half of the year.

Looking ahead, although the initial scale of this round of new policy-based financial instruments may fall short of... In 2022, there remains potential for further expansion of the platform. Meanwhile, with the innovative upgrading of policy tools, mechanisms such as the “Tech Board” bond market and REITs exit pathways will further reduce corporate financing costs, enhance capital-use efficiency, and foster a virtuous cycle of “investment—operation—exit.”

The municipal investment company should seize this opportunity to shift from traditional infrastructure development toward areas such as technological innovation, consumption upgrading, and stable foreign trade. It should leverage policy-based financial instruments to address capital adequacy issues, secure market-oriented financing support, and achieve sustainable development. After all, policy-driven benefits are temporary, whereas high-quality economic development is the path to long-term prosperity.