Local Government Debt Issuance Hits Two Year High on Special Bond Surge

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Debt issuance by China’s local governments has hit a two year high in terms of both scale and net financing amount as regional authorities step up funding for infrastructure projects.

Total local government debt issuance was 882.97 billion yuan in August, for an on-month rise of 16.6% and  the highest level since July 2016, while the net financing amount was 765.485 billion yuan, for the highest level since September 2016.

Infrastructure funding was the main driver of the rise in local government bond issuance, with key projects including rail transit projects in Changchun and Suzhou, whose combined investment sum is expected to be 173.732 billion yuan.

Since July regional governments around China have either publicly announced investment plans for key projects prior to the year’s end, or convened meetings to discuss and arrange accelerated infrastructure investment.

Local government debt issuance is expected to rise further in September following a push from China’s Ministry of Finance for accelerated issuance of special bonds.

Local bond issuance is expected exceed 500 billion yuan in September, while total local government debt issuance could exceed 900 billion yuan.

Huachuang Securities forecasts special bond issuance of at least 550 billion yuan in September, with the total volume of new bonds approaching 600 billion yuan.

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