Domestic observers expect local government bond issuance to further expand and accelerate in 2019, as Beijing contends against downwards economic pressure.
Mao Jie (毛捷), a professor at the University of International Business and Economics in Beijing, said to Yicai that given the ongoing increase in downward pressure on the Chinese economy and complex external conditions, he expects the local government bond quota to be increased, and in particular the special bond quota, in order to provide firm support to economic growth.
China has already seen a steady increase in new local government bond quotas over the past several years, which stood at 1.18 trillion yuan in 2016, 1.63 trillion yuan in 2017 and 2.18 trillion yuan in 2018.
The fixed income research team at Industrial Bank Co. expects local governments in China to issue 2.3 trillion yuan in new bonds in 2019, while Sinolink Securities foresees a figure of as much as 3 trillion yuan.
In addition to an expansion in issuance volumes analysts also foresee an acceleration in the pace of issuance. The Standing Committee of the National People’s Congress has already authorised the advance release of a portion of the new local government bond quota, which marks a break from the precedent of issuance following the annual meeting of China’s two legislative assemblies in March.