Core Viewpoint - The audit reports from 17 provinces reveal significant issues in the management and usage of special bonds, despite their effectiveness in stabilizing investment and the economy. The problems include data inaccuracies, project delays, and underperformance in expected returns, which pose potential risks to local governments' ability to repay interest on these bonds [1][2][4]. Special Bond Issues Overview - The issuance of special bonds has been increasing, with an expected issuance of 4.4 trillion yuan this year. As of June, the total local government special bond debt reached approximately 34.8 trillion yuan, accounting for about 67% of total local debt [1]. - Audit reports highlight that some local governments have exaggerated project benefits to secure special bond funding, leading to mismanagement and inefficiencies [2][3]. Project Management Challenges - Many special bond projects are experiencing slow progress or have been halted, resulting in potential economic losses. For instance, in Sichuan, 10 projects were either not started or had been halted, with total investments of 150.8 billion yuan, of which 133.01 billion yuan were from bond funds [3]. - In Hebei, three projects were terminated due to inadequate land conditions, leading to a loss of 14.5 million yuan in upfront costs [3]. Monitoring and Data Integrity Issues - The special bond monitoring system is found to be flawed, with discrepancies between reported and actual expenditures. This hampers the ability of financial authorities to conduct comprehensive risk monitoring [4]. Root Causes of Problems - Local governments often lack the necessary project management capabilities and risk assessment skills, leading to inflated project proposals and unrealistic revenue expectations [7][8]. - The decreasing number of public welfare projects that can cover interest payments has contributed to the issue of overstated project benefits [8]. Policy Responses and Recommendations - The State Council has introduced measures to optimize the management of special bonds, including a "negative list" approach to broaden the scope of eligible projects and allow for more flexible funding arrangements [9]. - Recommendations include enhancing project feasibility assessments, involving financial institutions in preliminary evaluations, and shifting from a "funding for projects" to a "project-driven funding" approach to ensure effective allocation of resources [10][11].

Core Viewpoint - The article highlights the strict regulatory measures imposed by provincial governments on the issuance and use of special bonds, aimed at preventing misuse and ensuring funds are allocated to actual projects rather than being diverted to other areas [2][3][6]. Group 1: Regulatory Measures - Several provinces have intensified management of special bond funds, requiring dedicated fiscal accounts for these funds and mandating timely reporting on fund usage and project status [4]. - Counties with issues related to special bonds are prohibited from issuing new bonds until they rectify the problems [5]. - The audit results revealed that 1,325.97 billion yuan was mismanaged, with 651.8 billion yuan being misappropriated for other uses, highlighting the need for stringent oversight [6][10]. Group 2: Misuse of Special Bonds - Misuse of special bonds has been prevalent, with funds being redirected to cover general expenditures rather than being used for designated projects, violating the intended purpose of these bonds [10][11]. - Local governments have employed various methods to misappropriate special bond funds, including circular financing through affiliated companies [7][8]. - The pressure to maintain "three guarantees" (basic living needs, education, and healthcare) has driven local governments to divert special bond funds to cover budget shortfalls [11][13]. Group 3: Impact on Local Governments - The tightening of special bond regulations may lead to reduced flexibility in fund allocation for local governments, potentially causing financial strain in the short term [15]. - The changes in special bond usage rules disproportionately affect lower-tier governments, which often rely on these funds for liquidity [16]. - The article suggests that while the immediate impact may be challenging for financially constrained regions, long-term compliance with regulations could enhance fiscal discipline and transparency [15][16].