China Pouring Money... Local Government Bond Issuance Expected to Exceed 325 Trillion Won in Q1

Twice as Many Bonds Issued by Chinese Regions for Economic Stimulus Compared to Last Year
Warnings of Risks if Bond Issuance Timing, Scale, and Maturity Structure Are Not Carefully Planned

[Asia Economy Beijing=Special Correspondent Jo Young-shin] The scale of local special bonds issued by local governments across China this year has been estimated to exceed 1.5 trillion yuan (approximately 286 trillion KRW). This means that local governments are issuing large-scale bonds and engaging in economic stimulus through infrastructure investment to achieve the Chinese government's economic growth target of "5.5% or higher" for this year.

Photo by Xinhua News Agency Capture

On the 24th, the state-run Xinhua News Agency reported that as of the 22nd, the special bonds issued by local governments across China exceed 1.5 trillion yuan. Xinhua News Agency stated that out of the 1.5 trillion yuan in bonds issued this year, more than 1.1 trillion yuan was raised through newly issued bonds.

Xinhua News Agency, citing industry sources, explained that the scale of local bonds issued this year is more than double that of the same period last year, and that most of the funds raised through bond issuance will be used for infrastructure investment.

Some local governments have also disclosed their bond issuance plans for the second quarter in advance. As of the 22nd, Fujian Province, Gansu Province, Hainan Province, Guizhou Province, Zhejiang Province, Jilin Province, and Chongqing City have announced their second-quarter bond issuance scales in advance.

Tang Linmin, a researcher at the China International Futures Research Institute, said, "The scale of local bond issuance in China in the first quarter of this year may exceed 1.7 trillion yuan," adding that local bond issuance this year may show a pattern of high issuance in the first half and low issuance in the second half. He explained that local governments across China may rush to issue bonds following the central government's directive for economic stimulus.

Xinhua News Agency, citing the Chinese government work report, stated that the scale of local government special bonds budgeted for this year will reach 3.65 trillion yuan. The agency explained that the funds raised through local bonds issued this year will be invested in infrastructure, housing construction, urban regeneration, and rural modernization.

Xinhua News Agency particularly noted that bond issuance by local governments will proceed at a rapid pace and that infrastructure investment will be prominent this year. In fact, fixed asset investment in China from January to February, as announced by the National Bureau of Statistics of China, increased by 8.1% year-on-year, and newly started infrastructure projects doubled compared to the previous year.

In Chinese academia, voices are also calling for risk management regarding large-scale local bond issuance.

Professor Yuan Laicheng of the Central University of Finance and Economics said, "Local bond issuance will lead economic growth through fixed asset investment, and its effects are currently appearing." However, he added, "To minimize risks associated with local bond issuance and maximize its effects, project plans and other aspects must be carefully reviewed."

Professor Mao Jie of the University of International Business and Economics said, "To increase the efficiency of local bond issuance, the timing, scale, and maturity structure of bond issuance must be meticulously planned in advance," adding, "Above all, it is essential to fundamentally block the illegal use of funds raised through local bond issuance or their diversion from their original purposes."

This content was produced with the assistance of AI translation services.