Guidelines issued to regulate specialty towns

Some projects seen increasing local gov't debt risks

Top central government bodies issued guidelines on Tuesday to regulate the development of "specialty towns" that have sprung up across the country, warning that the projects risk intensifying local government debt risks.

The government has actively promoted the development of "specialty towns" - hamlets of a few square kilometers dedicated to unique local industries ranging from eco-tourism to painting and pottery - in a bid to find cleaner and more sustainable growth outside major cities.

More than 400 locations have been approved as "specialty towns" by the housing ministry so far.

However, since the plan was launched, there have been cases of carrying out the plan "rashly" or "blindly" and "in some areas there are even the first signs of intensified risks to government debt," according to guidelines released by the National Development and Reform Commission, the State economic planner, as well as environmental, housing and land ministries.

To meet the requirements of the new guidelines, provincial governments must strengthen oversight of the projects and central government ministries will carry out checks on those towns that have been approved to weed out those deemed unfit, the ministries said in the guidelines.

They warned that some of the projects showed a tendency to focus on real estate development instead of cultivating industries, saying that the plan must avoid building a thousand towns that look the same.

State-owned enterprises and private companies should be the prime investors in the projects and the government should as much as possible avoid taking on new debt, they said.

China's regulators have tightened controls on local government debt to fend off financial risks, but the country has also sought to support the funding needs of private firms and keep liquidity conditions relatively fluid.

Projects must also not cross the "red line" of environmental protection and should strictly control the use of new construction land and avoid high energy consumption and highly polluting industries, according to the guidelines.

In addition, building specialty towns should be done in a way that involves real industrial innovation in line with the advantages of the region so as to avoid "wearing new shoes to walk an old street," the ministries said.