China to discuss advancing 2024 bond quota as local authorities struggle for liquidity
- Standing Committee of the National People’s Congress will meet on Friday to discuss a bill to approve front-loading the 2024 bond allocation
- Amid a struggling economy, provincial and municipal authorities are struggling to raise funds amid falling revenues from land sales and taxes
Amid efforts to tackle local government debt and stressed regional banks as financial stability has jumped high on Beijing’s agenda, China’s lawmakers will meet later this week to discuss front-loading its 2024 bond quota.
Bonds have become a major source of provincial and municipal fundraising as revenues from land sales have plunged due to a crisis in the property sector, while tax revenues have also fallen amid the post-Covid economic recovery.
The annual local bond quota and debt cap will officially be released during the National People’s Congress in March, but the Standing Committee of the national legislature will meet on Friday to discuss a bill to approve front-loading the 2024 allocation.
“Policymakers need to find a new bond quota for the fourth quarter to avoid a cliff, given that more than 90 per cent of this year’s local government special bond quota has been used,” said Larry Hu, chief China economist at Macquarie Capital.
It highlights rising risks at some Chinese small and medium-sized regional banks
As of last week, 4.18 trillion yuan (US$573 billion) of local government bonds have been issued this year, including 84.5 per cent of the quota for so-called special-purpose bonds mainly used to fund infrastructure, according to Zhongtai Securities.