A total of nine Chinese provincial governments raised a total of 113.8 billion yuan ($16 billion) through special-purpose bonds in the first five months of the year to help small banks replenish capital, compared with 63 billion yuan for the whole of last year.
The proceeds are used to help unlisted local lenders, mostly small or medium-sized urban and rural commercial banks and village banks, according to the prospectuses.
Northeaster China’s Liaoning province issued a total of 40 billion yuan of such bonds in the first five months, the most among the local governments, and the proceeds were allocated to Shengjing Bank, a major local commercial lender, and several major rural commercial banks.
The concentrated sale of the bonds highlights the fact that this type of funding is becoming an important way for small and mid-sized banks to replenish their working capital, Fitch Bohua, a unit of Fitch Ratings, said in a report.