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China’s Local Bond Issuance at Record High

China’s Ministry of Finance released an update on local government bond issuance from January to August 2022. Total issuance reached RMB 6.3 trillion, up 4% annually, hitting a record high.

The issuance by Guangdong Province was the highest, with RMB 655 billion (US$ 89.7 billion) issued, followed by Shandong (RMB 480.3 billion or US$ 65.7 billion) and Sichuan (RMB 401.1 billion or US$ 54.9 billion). Other major issuers were Hebei, Jiangsu, Zhejiang (over RMB 300 billion or US$ 41 billion each), and Henan, Anhui, Hunan, Yunnan, Guangxi, Fujian (over RMB 200 billion or US$ 27.4 billion each).

The Ministry of Finance’s report categorized bonds as either new bonds for infrastructure projects or refinancing bonds to repay maturing debt. During the period January-August, new bonds totaled RMB 3.7 trillion (US$ 510 billion), down 12% annually, and refinancing bonds totaled RMB 2.6 trillion (US$ 360 billion), up 44%.

The rise in issuance of refinancing bonds reflects increased pressure facing local governments attempting to service mature debts. China’s weak economic conditions, real estate downturn, declining government revenue from land sales, and slow tax revenue growth have all made local governments more dependent on taking out new debt to repay old debt.

Source: Central News Agency (Taiwan), September 26, 2023