Chinese local governments urged to speed up bond issuance for infrastructure projects

Chinese local governments will join commercial banks to accelerate fund injection into infrastructure projects, as a way for the country’s policymakers to step up the fight against economic downside risks in the second half of this year.

The Ministry of Finance has required provincial-level and authorised municipal governments to finish no less than 80% of the 1.35 trillion yuan ($196.2 billion) special bond quota by the end of September.

The ministry said the funds raised from special bonds should be used effectively and should be injected into targeted projects as soon as possible.

According to the National Bureau of Statistics, the guideline came after the country reported a record-low fixed asset investment growth figure in the first seven months, which retreated to 5.5% from 6% for the first six months.

According to China Daily, the weaker-than-expected investment has increased market concerns on economic slowdown pressure, although the country’s monetary authority has already pushed commercial banks to increase lending since the second half.

The central bank recently released data showing that in July, the new yuan loans rose to 1.45 trillion yuan, which was higher than the market’s expectation of around 1.2 trillion yuan, and also increased by 623.7 billion yuan from a year earlier.

Chief economist of Chinese property developer Evergrande, Ren Zeping said: “It indicated that commercial banks have not yet increased long-term lending to non-financial enterprises and only boosted short-term interbank lending, as the banks lack incentives to lend out amid weakening economic outlook.”

Experts indicated that issuance of local government special bonds, which will raise money mainly for the construction of railways and expressways, will be another way to encourage banks’ fund injections, as they are the major holders of the bonds.

 

Source: China Daily 

 

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