Official data indicates that local government bonds emerged as the largest bond category on the Chinese debt market in 2017, as authorities continue to convert local government debt into bonds.
Figures released by the Ministry of Finance on 17 January indicate that approximately 4.36 trillion yuan (approx. USD$680 billion) in local government bonds were issued in 2017, of which 1.59 trillion were new bonds and 2.77 trillion involved local debt replacement.
The release of 4.36 trillion yuan in local government bonds in 2017 marks a year-on-year decline of 28% compared to the figure of more than 6 trillion yuan in 2016.
According to the Ministry Finance China’s total local government debt balance was 16.47 trillion yuan as of the end of December 2017, of which 14.74 billion yuan consisted of local government bonds.
Data from Wind indicates that as of 17 January this 14.74 billion yuan in local government bonds is the biggest category on China’s debt market, followed by 13.45 trillion yuan in treasury bonds, 13.24 trillion yuan in bonds issued by policy banks, and 7.85 trillion yuan in interbank certificates of deposit.
Local government bond issuance has rapidly gathered pace since 2015, after new budget laws came into effect stipulating that the only lawful form of local government debt would be government bonds.
As of the end of 2014 the local government balance was 15.4 trillion yuan, of which over 90% was raised via non-bond methods.
The total volume of local government bond replacement over the past three years has since reached 10.85 trillion yuan in total.