(Yicai Global) Feb. 8 -- The pace of China's municipal bond issuance is predicted to increase after regional governments borrowed more than predicted last month to fund infrastructure projects amid slowing economic growth.

Some CNY698.9 billion (USD109.8 billion) worth of local government bonds were issued in January, rising more than expected at 93 percent from a year ago, according to data from Zhongtai Securities’ research institute and Wind. Analysts forecast the pace of issuance to increase in February and March.

By the end of January, some 20 regional administrations have disclosed their plans to raise CNY858 billion via such debt instruments in February and March, according to the same brokerage.

Local governments are set to speed up their bond issuance and invest the proceeds in major projects to promote stable economic growth, Wen Laicheng, professor at the Central University of Finance and Economics, said to Yicai Global.

The state is supporting borrowing. As economic pressures began to intensify since the second half of 2021, the finance ministry revealed the 2022 muni bond quota ahead of schedule. During an executive meeting last month, the State Council urged local governments to issue bonds to satisfy their funding needs for major projects while increasing effective investments.

The quota was released early due to the downward pressures, said Wen.

In January, almost 70 percent of the headline figure was special bonds. By then, about 33 percent of this year's quota of special bonds was used up. The proceeds will mostly go into investments in municipal and industrial park infrastructure, subsidized housing projects, and social programs, according to Zhongtai Securities.

The replenishment should show in cities. Infrastructure investment should rebound modestly this year, according to research institutions.

In the first quarter, infrastructure investments are expected to grow by 7 or 8 percent from a year earlier, Wang Qing, chief macro analyst at Golden Credit Rating, said to Yicai Global. During the full year of 2022, the number should rise by 4 to 6 percent due to policies that aim to stabilize growth, Wang added.

The boost is not big. It is unlikely that investments on infrastructure stage a big rally this year, said Luo Zhiheng, chief economist at Yuekai Securities. The 2022 clip of rising should range between 4 and 6 percent, while the first half may be more dynamic than the second half, Luo added.

The economy is predicted to grow steadily in the first quarter, said Wen at the CUFE. Some CNY1.2 trillion (USD188.6 billion) worth of special bonds issued in the fourth quarter of 2021 should support many projects that start in the first quarter and notes issued in the ongoing quarter will maintain that support, Wen added.

Editors: Xu Wei, Emmi Laine, Xiao Yi