China’s provincial governments have accelerated issuance of special refinancing bonds since the beginning of October. These special refinancing bonds are used to repay existing debt, including settlement of government arrears to businesses. Beijing gave the green light to issuance of such bonds so as to mitigate risks associated with local government debt.
On October 9th, Inner Mongolia became the first province to issue special bonds this year. According to local disclosure records regarding special bond issuance, the total issuance of local special bonds reached approximately 840.4 billion yuan (US$ 115 billion) within 17 days. Yunnan, Inner Mongolia, and Liaoning are the top three issuing provinces, with each issuing over 100 billion yuan in special bonds.
During the three years leading up to this wave of special bond issuance, there were two prior waves of special bond issuance by local governments. Both prior waves were longer in duration than the most recent 17-day wave. The first wave occurred over 10 months and amounted to about 627.8 billion yuan and the second one, 9 months in duration, totaled 504.2 billion yuan of issuance.
Source: Security Times (China), October 19, 2023