(Yicai) Feb. 27 -- China’s local governments have issued CNY2.2 trillion (USD332.4 billion) in bonds so far this year, a jump of 22 percent from the same period last year, as they step up funding support to accelerate the launch of local infrastructure projects.

Several provinces announced new bond issuance plans immediately after the Chinese New Year holiday, which ended on Feb. 23. Five provinces, including eastern Jiangsu province, issued a combined CNY139.2 billion (USD20.3 billion) yesterday, while central Hunan province and northeastern Liaoning province are expected to issue a total of CNY89.2 billion (USD13 billion) today, according to Yicai’s review of bond issuance data released by local government finance departments.

This year marks the beginning of the 15th Five-Year Plan, Wen Laicheng, a professor at Central University of Finance and Economics who has long followed local government debt, told Yicai. Many regions have rolled out major construction projects, and the issuance of new bonds will raise funds for these projects, helping them break ground sooner and generate tangible work output.

"The fast pace of bond issuance by local governments is a key measure to drive economic growth," said Wen.

To launch major projects as early as possible, the Ministry of Finance allocated part of the 2026 quota for new local government debt at the end of last year, allowing this year’s local government bond issuance to begin as early as the start of January. So far, 32 provincial-level regions and major cities have completed their first government bond issuance of the year.

Refinancing Pressure

Local government bonds are divided into new bonds and refinancing bonds depending on their purpose. New bonds are freshly issued, and the funds are primarily used for infrastructure and other major projects, as well as public welfare projects. Refinancing bonds, on the other hand, are mainly used to repay principal on maturing debt, which is essentially "borrowing new to repay old."

Due to the large amount of local government debt maturing this year, coupled with the ongoing work to replace existing hidden debts, the scale of refinancing bond issuance will remain significant this year to ease repayment pressure, Wen said.

Of the roughly CNY2 trillion in local government bonds already issued, new bonds and refinancing bonds each accounted for about half as of Feb. 25, according to data from the Enterprise Early Warning Platform. Of the new bonds, approximately CNY600 billion (USD87.5 billion) are special bonds that will be directly used for project investment, while the remainder includes general bonds and special bonds for other purposes. Of refinancing bonds, around CNY680 billion are special refinancing bonds used to replace existing hidden debts, while the remaining funds are used to repay maturing debts.

Active Fiscal Policy

Against the backdrop of an active fiscal policy, the scale of local government bond issuance has been rising steadily in recent years. Last year, total annual issuance exceeded CNY10 trillion (USD1.4 trillion) for the first time ever. Several financial experts interviewed by Yicai believe that this year's issuance scale will also remain above CNY10 trillion.

A large portion of the funds raised from last year’s local government bond issuance was used for "borrowing new to repay old," which was one of the reasons for the slowdown in infrastructure investment growth last year, several fiscal experts told Yicai. In order to stabilize investment and reverse the downward trend, the central government has mandated that a higher proportion of special bonds be used for project construction this year.

Local governments issued approximately CNY10.3 trillion (USD1.5 trillion) in government bonds last year, including about CNY5.3 trillion in new bonds and CNY4.9 trillion in refinancing bonds, according to data released by the Ministry of Finance earlier this month.

As of the end of last year, the total outstanding balance of local government debt jumped 15 percent from the previous year to reach approximately CNY54.8 trillion (USD8 trillion). However, it remains below the CNY57.9 trillion limit approved by the National People's Congress. Overall, local government debt risks remain generally safe and controllable, Ministry of Finance data show.

Editors: Tang Shihua, Kim Taylor