Local government bond issuance has already surged past the 2 trillion yuan threshold this year, with analysts forecasting further acceleration this month.
Data from East Money Information (东方财富) indicates that as of 9 June a total of 515 local government bond issues had taken place throughout China since the start of the year, for funds of 2.030668 trillion yuan.
This amount is 1.05 trillion yuan short of the full year new quota of 3.08 trillion yuan that is scheduled for issuance prior to the end of September.
Zhang Yiqun (张依群), vice-chair of the performance management research specialist committee of the China Finance Association, said to Securities Daily that the pace of issuance is on track to accelerate in June.
Liu Yu (刘郁), fixed income analyst with Guosheng Securities, forecasts issuance of 600 billion yuan in local government bonds this month, with 42 bond issues scheduled for the period from 10 – 14 June to raise 201.884 billion yuan.
According to Zhang the focus will be on acceleration in the issuance of special bonds, which will become a key source of funds to drive growth of the Chinese economy in the near future.
Zhang believes that acceleration in local government bond issuance will raise China’s endogenous economic growth momentum, drive gains in domestic demand, and serve to effectively buffer external economic shocks.
“The focus for local government bonds will be investment in livelihood areas, and following the continuous advancement of the implementation of local government bond projects, key livelihood areas including roads and transit, healthcare, education technology and environmental protection will see comprehensive improvements,” said Zhang.
In April the Ministry of Finance issued the “Opinions Concerning Properly Performing Local Government Bond Issuance Work” (关于做好地方政府债券发行工作的意见) which called for local governments to gradually extend the share of long-term bonds, in order to satisfy the term preferences of a greater range of investors.