(Yicai Global) April 20 -- China has instructed local governments to issue most of this year’s CNY3.65 trillion (USD572.7 billion) of new special bonds by the end of June, and the rest by the end of September, to clear room for future policies, Yicai Global learned from an insider at the finance ministry.

Though a previous cabinet meeting had called for all new special bonds to be issued by the close of the third quarter, a recent finance ministry document urged local authorities to speed up the process and allocate most of 2022’s quota by the end of this quarter.

The stepped-up pace of issuance will raise effective investment and help drive economic growth amid the impact of the ongoing Covid-19 outbreak in China and the Russia-Ukraine conflict, according to Wen Laicheng, professor at Central University of Finance and Economics.

Local government special bonds are an important tool in China’s fiscal policy and play a key role in driving investment and stabilizing the economy. This year’s quota is the same size as last year’s, but the rollout pace is much faster.

The finance ministry released CNY1.46 trillion of this year’s special bonds quota ahead of schedule at the end of last year and the remaining amount, about CNY2.19 trillion, at the end of last month.

By the end of March, local governments had issued CNY1.25 trillion of the bonds, equal to 86 percent of the quota released by that point. More than 60 percent of the funds raised went to infrastructure projects, according to analysts. CNY415.7 billion (USD64.9 billion) was used for municipal and industrial park infrastructure and CNY231.6 billion for transport infrastructure.

The finance ministry has also widened the use of special bonds this year. Together with the National Development and Reform Commission, China’s top economic planner, it is guiding local governments to include projects such as urban pipeline networks and water conservancy, Song Qichao, head of the ministry’s budget department, said recently.

Grain warehousing and logistics facilities have also been added to the list of key areas for funding by special bonds to help support the supply of key agricultural products and guarantee national food security.

Editor: Futura Costaglione