China’s debt-fuelled infrastructure investment drive sees record 1.94 trillion yuan bonds sold in June
- Local governments sold 1.94 trillion yuan (US$289 billion) worth of bonds in June as China turned to its old playbook of boosting economic growth
- China’s State Council said last month that policy banks would increase their credit line to provide 800 billion yuan to fund infrastructure projects
China is racing against time to rescue its coronavirus-hit economy with a renewed push of debt-fuelled infrastructure investment after its local governments set a record for bond issuance in June.
Local governments sold a record 1.94 trillion yuan (US$289 billion) worth of bonds last month, representing a year on year increase of 143.27 per cent, according to Great Wall Securities, as China once again turned to its old playbook of driving up growth through public investment.
The worst may indeed be over, but the zero-Covid framework is here to stay and new outbreaks in China and elsewhere serve as a warning
“Despite last week’s moderation, China’s Covid restrictions remain among the harshest in the world,” said London-based research firm TS Lombard on Monday.
“The worst may indeed be over, but the zero-Covid framework is here to stay and new outbreaks in China and elsewhere serve as a warning that further severe lockdowns on the scale of that in Shanghai cannot be ruled out.”
According to the latest official figures from the Ministry of Finance, China issued 1.21 trillion yuan of local government bonds in May, taking the total for the first five months of the year to 3.32 trillion yuan.
Infrastructure investment has been touted by Beijing as the key driver to steady the economy, which is expected to slow sharply in the second quarter following a citywide lockdown of China’s financial hub Shanghai for over two months until it reopened on June 1.