CCP local debt issuance hit an 8-month high in April.
Local debt issuance in April hit an eight-month high, up more than 60 percent from March, and Communist Party officials said local debt issuance will increase month by month in the second quarter of this year.
According to Reuters, the mainland issued RMB 770 billion of local bonds in April, an increase of more than 60% over March, and officials from the Ministry of Finance said the issuance scale will still increase in a stepwise manner in each month of the second quarter because the overall annual issuance scale is still large.
In addition, the average issuance rate of local bonds in April was 3.48%, up 4 basis points (bp) from the previous month; with the increase in the issuance of longer maturities, the average maturity of issuance in April rose to 11 years from the previous month.
The issuance scale of local bonds with maturity of 10 years and above was 492.31024 billion yuan in April, an increase of more than 1.4 times compared with the same maturity scale in March. In addition, as of April, Shandong, Guangdong and Jiangsu provinces to issue the scale of the top three, all more than 100 billion. Last year, Shandong was the first to issue bonds, with 450.2 billion yuan, while Jiangsu and Guangdong were the second and third.
In this year’s central and local budget report, the Ministry of Finance of the Communist Party of China (CPC) said that 3.65 trillion yuan of new special bonds were arranged for local governments this year, about 100 billion yuan less than last year’s 3.75 trillion.
Last year, due to the epidemic, the CCP issued a record 6.44 trillion yuan for the year, and, with the deficit rate set at more than 3.6%, broke 3% for the first time, while the dramatic expansion of debt size also led to a debt ratio near the lower limit of the alert range.
Public information shows that CCP local government bonds are generally used for the construction of local public facilities such as transportation, communications, schools, hospitals and sewage systems. But the CCP also acknowledges that some local debt is used to borrow new money to pay off old.
Because local bonds are open for sale to the general public starting in 2019, and some people have been lulled by the CCP authorities into thinking that local bonds will be protected with the endorsement of local authorities, Xie Tian, a chair professor at the University of South Carolina Aiken School of Business, advises ordinary investors to be wary.
According to Xie Tian, “Now that it’s open for ordinary citizens, individuals to invest, it’s actually shifting the crisis of bad debts and bad debts onto ordinary Chinese.”
Commentator Wen Xiaogang also said that the mainland because of the economic downturn, fiscal revenue decline, some counties civil servants can not even pay salaries, is to rely on the issuance of debt or borrowing to maintain the old, local bonds even if the authorities backed, if the economy is not good in the future to pay off will also be a problem, the loss or the people.
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