In a bid to tap into foreign investments and boost the local economy, China’s southern tech hub and mass-manufacturing powerhouse are planning to issue offshore bonds in Hong Kong and Macau – marking the first direct offshore debt sales by local-level authorities in the country. The Shenzhen Finance Bureau plans to sell up to 5 billion yuan (US$772 million) worth of bonds via Hong Kong. Meanwhile, provincial finance authorities for Guangdong say an unspecified amount of bonds will be sold via Macau to enhance the development of the Greater Bay Area , in line with Beijing’s intentions. There was no indication of what the funds would be used for. The plan looks to follow through on a January 2020 proposition by Shenzhen’s finance authorities at the annual local legislature meeting. Analysts say bond sales in Hong Kong and Macau would help the governments of Shenzhen and Guangdong diversify their funding channels and broaden their investor base. The funds raised offshore will be channelled back to local governments and will likely go into infrastructure projects Banny Lam Both the city- and provincial-level governments published notices on Tuesday seeking underwriters and lawyers for their offshore debt sales. Banny Lam, head of research at CEB International Investment, also noted that the fundraising exercise in Hong Kong and Macau reaffirms the central government’s plan to support the Greater Bay Area – a development plan to link the cities of Hong Kong, Macau, Guangzhou, Shenzhen, Zhuhai, Foshan, Zhongshan, Dongguan, Huizhou, Jiangmen and Zhaoqing into an integrated economic and business hub. “The funds raised offshore will be channelled back to local governments and will likely go into infrastructure projects,” Lam said. “It will strengthen the role of Hong Kong, which is an offshore yuan centre, in the [economy of] the Greater Bay.” The local-level debt-sale announcements came as the central government has tightened its supervision of local government borrowing to pay for infrastructure investments and property construction this year, following concerns over rising default risks. Large-scale stimulus measures in 2020 to prop up the coronavirus-hit economy led to a sharp rise in debt. China debt: has it changed in 2021, and how big is it now? The economy of export-oriented Guangdong grew by 13 per cent in the first half of this year – exceeding the national rate of 12.7 per cent – thanks largely to the province’s strong export performance as demand from major international markets such as the United States started recovering from the pandemic. However, Shenzhen’s economy grew by only 9.7 per cent in the first half of the year from a year earlier, posting one of the lowest half-year growth results in Guangdong. The growth-rate percentages were all skewed upwards by the low comparison base from last year, when the pandemic crippled China’s economy. Both Guangdong and Shenzhen are financially strong with a low debt burden, according to Amanda Du, vice-president and senior credit officer at Moody’s Investors Service. China implores US firms to invest more in northeast rust-belt region near Russia, North Korea If their fundraising is successful, it will set a precedent for future offshore offerings by Chinese regional and local governments, potentially further diversifying their access to global investors, Du said. China’s domestic bond market is already one of the world’s biggest, with a total value of US$15.5 trillion at the end of 2020, but the percentage of foreign investment is relatively small. Local governments are a key seller of bonds, raising 3.34 trillion yuan (US$515.5 billion) in the first half of this year, according to a report published on Wednesday by US rating agency Moody’s. Moody’s report also said that, even though there has been a broad recovery of revenue growth among local governments, “significant deficit remains in [regional and local government] budgets”, and that “the deficit will need to be made up by fiscal transfers and higher debt”.