(Yicai Global) Jan. 25 -- The value of urban construction investment bonds issued in China since the start of this year is 25.7 percent down on a year earlier amid a regulatory clampdown on local government financing vehicles.

Some CNY345.5 billion (USD54.5 billion) of UCIBs were sold between Jan. 1 and 24, compared with CNY465.1 billion a year ago, according to figures  financial data platform Wind. But that was still higher than in the same periods of 2020 and 2019 because of greater liquidity.

UCIBs, also known as ‘quasi-municipal bonds,’ are medium-term debt sold by local government financing vehicles to fund infrastructure projects, mainly in the property, transport, and utility sectors.

But around Jan. 1 China’s interbank bond market regulator, the National Association of Financial Market Institutional Investors, stipulated that the sale of new bonds by LGFVs now designated as high-risk must be used only to pay maturing debt.

Though the default risk of UCIBs is less this year, attention still needs to be paid to the risk that the value of the bonds in key regions could fluctuate, according to Luo Zhiheng, chief macroeconomic analyst at Yuekai Securities.

Jiangsu, China’s second-biggest provincial economy, has sold about CNY121.6 billion of UCIBs so far this year, topping the rankings and accounting for about 35 percent of the total. Zhejiang and Anhui are next with CNY41.8 billion and CNY24.3 billion, respectively. All three provinces are in eastern China.

It is much more difficult for areas with high debt and a weak economies to refinance through selling new UCIBs, and also because market recognition of related companies has declined, an underwriter in eastern China told Yicai Global.

Institutions are increasingly paying more attention to where urban investment platforms are located and to their specific operating conditions, according to Fu Yuqing, manager of HSBC JinTrust Fund Management’s stable yield bond fund.

The total value of UCIBs issued this year will not be low, but the structure will diverge further, said Sun Binbin, chief fixed income analyst at Tianfeng Securities.

Editors: Tang Shihua, Futura Costaglione