The World Bank has recently funded the budget reform programs of two local Chinese governments. The loan, amounting to $200 million each, will be used to develop a strong and sustainable foundation for the finances of Hunan and Chongqing.
"We are pleased to support the fiscal reform programs of Hunan Province and Chongqing's Dadukou District with the aim of improving efficiency in public resource management and placing their finances on a sustainable path.
"We hope these operations will contribute to China's efforts to achieve fiscal sustainability at the subnational level, which is vital for sustainable growth," said Bert Hofman, World Bank Country Director for China.
With the support from the World Bank, Hunan and Chongqing will now be able to implement their budget reform activities which include the development of a medium-term fiscal sustainability framework; integrated approach to capital budgeting; an effective system for financial health monitoring; and the enhancement of transparency and accountability in budget resource use.
The two local governments are already implementing China's new budget law. And with the implementation of these programs, Hunan and Chongqing will be able to complement the policy change with institutional changes.
"These two operations are showing the way on how to implement critical fiscal reforms. These reforms require not only policy changes, but changes in the mindset and the development of new institutional arrangements and capacities as well," said Min Zhao, World Bank Senior Economist and co-task leader of the operations.
China to See Economic Growth in 2017
The World Bank predicts that China will see economic growth for China this 2017.
However, the growth rate will remain steady at 6.5 percent because the Chinese economy is rebalancing from manufacturing to services, and from investment to consumption which will continue moderate progress.
Investors will be paying close attention with soon-to-be President Trump's treatment on U.S.-China trade relations.
Despite the tension between the two countries intensifying in the recent weeks, a strong U.S. economy is still beneficial for countries like China which benefit from the U.S. consumer and corporate investment.
Analysts hope that Trump doesn't start a trade war.
With support coming from the World Bank, these programs will not only benefit Hunan and Chongqing, but they will surely have a positive impact on the national level as well.