Over $30 Billion in Special Bond Quotas Issued to Resolve Risk Problems of Smaller Chinese Banks

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China has stepped up the issuance of special bonds as part of efforts to forestall risk amongst smaller regional banks.

As of 11 November new special bond quotas worth 200 billion yuan (approx. USD$30.46 billion) had been fully allocated on a regional basis to support risk prevention efforts for small and medium-sized banks, according to an announcement made by China’s Ministry of Finance (MOF) on 18 November.

The National People’s Congress (NPC) previously gave its approval to a new special bond quota of 3.75 trillion yuan for 2020.

The latest MOF data indicates that as of the end of October a total of 6.1218 trillion regional government bonds had been issued, including 4.4945 trillion yuan in new bonds, and 1.6273 trillion yuan in refinancing bonds.

Of the new bonds, a total of 947.9 billion yuan of standard bonds have been issued – for the full completion of the annual amount, while 3.5466 trillion yuan of special bonds had been issued, comprising 94.6% of the annual amount. 3.55 trillion yuan in special bond quotas had also been allocated, equal to 99.9% of the total.

China’s regional banking sector has been roiled by a string of potential bank failures followed by takeovers and restructurings since May 2019, beginning with the forcible acquisition by the Chinese government of Inner Mongolia’s beleaguered Baoshang Bank.

The recently launched Bank of Sichuan – China’s largest regional lender – is the product of the merger of two ailing provincial banks –  Liangshanzhou Commercial Bank (凉山州商业银行) and Panzhihua Municipal Commercial Bank (攀枝花市商业银行), that had previously failed to provide financial reports for a two year period.

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