China’s local governments are set to issue more special-purpose bonds by end of November to stabilize the economy by stepping up infrastructure spending, after the cabinet promised to tap unused quota in previous years.
As of Sept. 21, Hebei and eight other provinces as well as the cities of Ningbo and Xiamen had released their bond issuance plans for October and the fourth quarter, according to the information on the website of the China Central Depository & Clearing. They include 234.3 billion yuan ($33 billion) of new special-purpose bonds to be issued by the end of October.
Special-purpose bonds are designated for investment in infrastructure and public welfare projects which are commercially viable. They must be repaid with income generated from the projects, compared with general-purpose bonds, which are paid back with local governments’ fiscal revenue.
The State Council, China’s cabinet, had said on Sept. 7 that local governments would receive an additional 500 billion yuan of quota for special-purpose bond issuance from unused quota since 2019 for issuance before November.
Since this year’s 3.65 trillion yuan quota for new special-purpose bonds has been used up and the latest quota should be part of the additional 500 billion yuan quota announced by the State Council, analysts said.