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China Local Governments Issue $302bn in Special Bonds This Year

Local governments will need to issue another $210bn in special bonds this month if they want to meet the cabinet’s half-year goal

The People's Bank of China kept the one-year loan prime rate (LPR) at 3.45%, while the five-year LPR was unchanged at 4.2%.
The People's Bank of China has a relatively large policy space to lower the reserve requirement ratio, a former central banker said on Sunday. File photo: Reuters.


Local governments in China issued a net 2.03 trillion yuan ($302.91 billion) in special bonds between January and May this year, a Finance ministry official said on Thursday.

That means local governments will need to issue another 1.42 trillion yuan ($210 billion) in special bonds this month if they want to meet the cabinet’s half-year goal, which is largely in line with analysts’ estimations.

China’s cabinet told local governments on Tuesday to ensure 3.45 trillion yuan in special bonds is issued for infrastructure by the end of June, bringing the deadline forward by three months in a bid to boost investment.

Nomura has said that the Chinese government faces a revenue shortfall this year of nearly $900 billion and it expected debt would be used to fill the cash shortage. Covid lockdowns in multiple cities and a big drop in tax revenue from land sales are estimated to have cost the government about 6 trillion yuan, it said.

Other analysts say the move could increase pressure on market liquidity and compel the central bank to pump out more money.

“According to bond issuance plans of local governments, they can basically complete the special bond issuance quota by June,” Assistant Finance Minister Ou Wenhan told a news conference on Thursday.

The ministry said earlier that local governments had issued 1.85 trillion yuan, or 54% of the total, in special bonds by May 27.

To prop up the Covid-battered economy, Chinese provinces are racing to frontload investment even as policy advisers step up calls for further debt issuance in the second half.


  • Reuters with additional editing by Sean OMeara




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Sean O'Meara

Sean O'Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.


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