Chinese local governments stepped up bond issuance in August, with sales about 67% higher than the previous month, in a bid to boost economic growth through higher investment.
Local governments issued 1.2 trillion yuan ($168.5 billion) of bonds last month, compared to 718 billion yuan in the previous month, according to public data.
After a slow pace of issuance in the first half of the year, bond sales have accelerated since June to speed up investment to bolster this year’s economic growth, said Wen Bin, chief economist at China Minsheng Bank.
In the first eight months of the year, local governments’ bond sales fell 14% year over year to 5.4 trillion yuan, including 2.3 trillion yuan of refinancing bonds and 3.1 trillion yuan of new bonds. Refinancing bonds are mainly used to repay existing debt, while new bonds are used to fund major infrastructure and livelihood projects.
Of the 3.1 trillion yuan of new bonds, about 2.6 trillion yuan were special-purpose bonds, which are issued to raise funds for revenue-generating projects that can repay the debt on their own, and the remaining 500 billion yuan were general-purpose bonds used for public welfare projects with no investment returns.
About a third of the 2.6 trillion yuan of special-purpose bonds were used for municipal and industrial park infrastructure, 20% for transport infrastructure such as railroads and toll roads, 8% were for rural village renovation, 7% for medical and health projects, and 6% for agriculture, forestry, and water conservancy projects, according to data from enterprise risk monitoring and pre-warning platform Enterprise Pre-Warning.