China’s Local Governments Cut Back on Bonds in First Half

Publisher:China Economic Review Time:2018-07-12

Chinese local governments reduced their bond issuance by about 24% year-on-year in the first half of the year, according to a report by China Chengxin International Credit Rating Co., as a nationwide scheme to cut back local debt levels draws to a close.

Local governments issued Rmb 1.41 trillion ($212.8 billion) worth of bonds from January to June 2018. Of this, around two-thirds came from a debt-to-swap initiative supported by Beijing due to end in August after three years of implementation, according to government figures.

The report by Chengxin also warned that bond issuance could be expected to speed up in the second half of the year with the end of the swap program, forecasting an average Rmb 307.9 billion in bonds issued per month.

Much of the quotas allocated to local authorities have not been filled, the report goes on, giving governments some freedom to issue bonds at a higher rate for infrastructure and growth stimulus projects. As a result, the total value of bonds issued in 2018 by local governments is set to exceed 2017 by over Rmb 500 billion.