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Tuesday, June 11, 2019, 17:55
China steps up local govt bond issuance to fund major projects
By Xinhua
Tuesday, June 11, 2019, 17:55 By Xinhua

In this undated photo, a staff member of China Construction Bank counts the Chinese yuan at a branch in Nantong, Jiangsu province. (XU JINBAI / FOR CHINA DAILY)

BEIJING China ramped up the issuance of special local government bonds to support economic growth and maintain reasonable and ample liquidity in the market, according to a notice on local government bonds issued Monday.

ALSO READ: China to speed up local govt bond issuance

Local governments and financial institutions are encouraged to use special bonds and other market-based financing methods to support key areas and major projects such as the coordinated development of the Beijing-Tianjin-Hebei region and the construction of the Yangtze River Economic Belt.

The decision aims to expedite infrastructure construction by expanding the proportion of projects that can be paid for with money from the special local debt. China raised the annual special bond quota for local authorities to a record of 2.15 trillion yuan (US$311 billion) in 2019, but infrastructure investment growth slowed to 4.4 percent in the first four months of the year amid economic uncertainty and trade tensions.

Most of the new local government bonds were used to finance projects under construction including railways, water conservancy works and agriculture infrastructure

Stocks of construction companies including China Railway Group Ltd and JSTI Group advanced in mainland and Hong Kong before the noon break Tuesday, reports Bloomberg.

China urged the implementation of debt repayment obligations. The provincial governments shall take full responsibility for the repayment of the special bonds.

It also called for a higher degree of marketization of local government bonds pricing and increasing diversification of the investors.

Institutions such as commercial banks, insurance companies and fund firms as well as individual investors are encouraged to invest in local government bonds, according to the notice.

Local governments issue nearly 1.5 t yuan bonds in Jan-May

China issued new local government bonds worth 1.4596 trillion yuan (US$211.1 billion) in the first five months of 2019, official data showed Tuesday.

The accumulated new bonds accounted for about 47.4 percent of the annual local government debt quota of 3.08 trillion yuan, according to a statement from the Ministry of Finance, the People's Bank of China and four other government agencies.

Among them, 859.8 billion yuan was raised by special local government bonds.

Most of the new local government bonds were used to finance projects under construction including railways, water conservancy works and agriculture infrastructure.

READ MORE: Local debt expected to narrow funding gap in China

The outstanding amount of central and local government debt stood at 33.35 trillion yuan at the end of 2018, or about 37 percent of national gross domestic product, according to a separate Q&A published by the Ministry of Finance. 

China's debt ratio is "lower than major market-economy countries and emerging market countries and its risks are generally under control," reads the statement as reported by Bloomberg.

(With Bloomberg input)

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