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China lowers capital ratio requirement for some infrastructure projects

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By Reuters

BEIJING (Reuters) – 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% from 25%, 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%.

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% of this minimum capital investment can be raised through equity financing, said the statement.

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% from January-September, slowing from the 5.5% 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.

(Reporting by Beijing Monitoring Desk; Writing by Yawen Chen and Gabriel Crossley, editing by Louise Heavens)