Trade war leads China to speed up US$202 billion local government bond issue
- State Council keen to boost infrastructure investment to offset tensions with the United States
- Finance Minister Liu Kun reported to have said some of the advanced bond issuance funds will be spent on key projects
China’s cabinet is set to accelerate a bond issuance programme by local governments to boost infrastructure investment, with the aim of offsetting the effects of the trade war with the United States.
The State Council approved a 2019 quota for new local government bond issuances of 1.39 trillion yuan (US$202 billion), enabling local authorities to start issuing debt from January, ahead of the usual schedule, the state-owned Xinhua News Agency reported over the weekend.
Finance Minister Liu Kun said that some of the advanced bond issuance funds will be used to fund key projects, local media reported.
Local governments will issue 810 billion yuan (US$117.76 billion) of special bonds and 580 billion yuan of general bonds at the start of 2019.
The full quote for 2018 was 1.35 trillion yuan for special bonds and 830 billion yuan for general bonds, meaning there may be the capacity to inject further capital through 2019 if required.
“Front loading local government bond issuances early in the year may give the government room to decide if it needs to raise issuance again later in the year,” said Frances Cheung, head of macro strategy, Asia at Westpac.