China Issues 4.36T Yuan in Local Government Bonds in 2019, Issuance Expected to Accelerate and Expand in 2020


Domestic analysts expect China to accelerate and expand the issuance of local government bonds in 2020 given an uptick in the advanced quota dispensed at the end of 2019.

Ministry of Finance data indicates that a total of 4.3624 trillion yuan in local governments were issued in 2019, comprised of:

  • 3.0561 trillion yuan in new bonds,
  • 1.1484 trillion yuan in refinancing fonds,
  • 157.9 billion yuan in swap bonds.

New bonds were comprised of:

  • 907.4 billion yuan in normal bonds,
  • 2.1487 trillion yuan in special bonds.

According to MOF data 1.39 trillion yuan in new bond quotas were issued by the end of May 2019, while full year new bond issuance was completed by the end of September.

March 2019 saw the official launch of over-the-counter issuance of local government bonds, with provinces including Zhejiang and Guangdong issuing 11.13 billion yuan in instruments via commercial banks.

The average yield for local government bonds was 3.47% in 2019, for a YoY decline of 42 basis points, while still 27 basis points ahead of the average treasury yield.

The average maturity of Chinese local government bonds in 2019 was 10.3 years, for a YoY rise of 4.1 years.

Issuance of local government bonds in China is expected to accelerate and increase in 2020, with Henan province and Sichuan province already making the first issue of special bonds on 2 January, 20 days ahead of the timeframe in 2019.

At the end of 2019 MOF issued a new special bond advance quota of 1 trillion yuan for 2020, as compared to an advance quota of 810 billion yuan for 2019.

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