(Yicai) Dec. 23 -- Fourteen Chinese provincial governments have released their bond issuance plans for the first quarter of next year, with a total scale of almost CNY1.2 trillion (USD170.6 billion).

The release of such local government debt issuance plans for the first quarter indicates that the Ministry of Finance has already assigned these provinces their overall debt issuance limit for 2026, Hu Hengsong, executive vice president of Caida Securities, told Yicai.

The annual bond issuance quota for local governments needs to be approved by the National People's Congress in March. But since 2019, the NPC Standing Committee has authorized the State Council to issue new debt limits for the following year in advance to allow local governments to complete bond issuance at the beginning of the year, thereby facilitating a quicker boost to local economic growth.

Based on the authorization from the NPC Standing Committee, the newly issued debt limits set in advance should not exceed 60 percent of the previous year's quota, said Hu. Therefore, as the new local government debt quota was CNY5.2 trillion this year, the limit set in advance for next year should be up to CNY3.12 trillion.

Since 2026 marks the beginning of China's 15th Five-Year Plan, there are many key infrastructure and livelihood projects that will launch across various regions, leading to a pressing demand for funding, Hu noted, adding that issuing the bond quotas in advance can provide local governments with sufficient financial support to initiate these projects in the first quarter.

China's fixed-asset investment fell 2.6 percent in the first 11 months of this year, with an overall slowdown in infrastructure investment, Wen Laicheng, professor at Central University of Finance and Economics, told Yicai. Considering that next year marks the start of the 15th Five-Year Plan, the urgency for local governments to issue bonds earlier is greater than in previous years, he explained.

Completing bond issuance as early as possible can promote the early kick-off of some major projects, laying a solid foundation for economic growth in the coming year, Wen noted.

Next year's new local government debt limit will be issued as early as possible to meet the funding needs of key projects in the first quarter, Li Dawei, a senior official at the budget department of the MOF, said in October. He was promoted to director of the finance ministry's debt management department in early November.

The early issuance of local debt limits will not only support the construction of eligible projects but also help local governments address existing hidden debts and resolve arrears to enterprises, ensuring the stable operation of local finances, Li pointed out.

Chinese local governments should issue CNY2 trillion in refinancing bonds to replace existing hidden debts next year, according to a plan previously announced by the MOF. These bonds will also be used for debt extensions and interest rate reductions, thereby easing the risk of hidden debts.

In the first quarter of this year, provincial-level regions issued a total of about CNY2.8 trillion in local government bonds, including CNY1.2 trillion in new bonds and CNY1.6 trillion in refinancing bonds, according to MOF data.

Editors: Tang Shihua, Futura Costaglione