Local Government Bond Issuance Surges over 90% in January

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China has seen the issuance of bonds by local governments surge by over 90% in the first month of 2022, as the economy cools down amidst the ongoing impacts of the COVID-19 pandemic.

In January local bond issuance in China was 698.9 billion yuan (approx. USD$110.5 billion), for an increase of 336.6 billion yuan, or 92%, compared to the reading of 362.3 billion yuan for the same period in 2021.

This included 583.7 billion yuan in new local government bonds, and 115.2 billion yuan in refinancing.

Wang Zecai (王泽彩), a researcher with the Chinese Academy of Fiscal Sciences, said to state-owned media that in January 2021 local bond issuance eased because the economy had performed better than expectations and pressure to stabilise growth was comparatively small, while funds for local infrastructure development were at the time ample.

In 2022 however downwards pressure on the Chinese economy has increased, prompting the central government to place greater emphasis upon growth maintenance and markedly accelerate the pace of bond issuance by local authorities.

“At present the economy is at a challenging juncture, and by expanding the debt quota in advance, accelerating the payments schedule and engaging in targeted investment of funds, it is possible to better employ the active role of bond funds in expanding effective investment, optimising the investment structure, and raising investment efficiency,” said Wang.

Of the 583.7 billion yuan in new bonds issued in January, 25.755 billion yuan in normal bonds will mainly be used for transport infrastructure development and 21.298 billion yuan in normal bonds for urban development.

165.355 billion yuan raised by new special bonds will be used for urban and industrial park infrastructure, and 105.518 billion yuan raised by new special bonds will be used for the development of transit infrastructure.