(Yicai Global) April 4 -- Local governments in China issued around CNY2.1 trillion (USD305.3 billion) of bonds in the first three months of this year, up 15.6 percent from a year earlier, with most going to finance infrastructure projects.

Refinancing bonds used to repay debt jumped 73 percent to CNY440 billion (USD63.9 billion) in the first quarter from a year ago, Yicai Global calculated. New bond issuance rose 6.3 percent to CNY1.67 trillion, of which CNY1.36 trillion were special bonds, up 4.5 percent.

Similar to last year, funds from special bonds were mainly put toward municipal administration, industrial parks, traffic and transport, and social undertakings such as healthcare and education, Wen Laicheng, a Central University of Finance and Economics professor, told Yicai Global. 

But unlike last year, special bonds were also used in new infrastructure, including cloud computing, data centers, traditional infrastructure, smart reconstruction, public technology services, and digital transition platforms, as well as in new energy fields such as public electric vehicle charging and battery swapping infrastructure and large wind power plants, Wen added.

Only a small proportion of the money went into new infrastructure and new energy fields, with 0.8 percent, or CNY6.8 billion, in the former and 0.2 percent, or CNY1.4 billion, in the latter, according to the finance ministry’s January to Februray data.

Some projects are suitable for firms to invest in, while governments are more prudent and take more care before issuing bonds for new energy projects because they require big investment and have a long construction period, Wen noted.

Local governments should improve their bond investment mix in the future and put more funds toward new energy and new infrastructure projects to meet high-quality development demand and raise project returns, said Luo Zhiheng, chief economist and head of the research institute of Yuekai Securities.

The increase in the amount of refinancing bonds sold in the quarter reflects the relatively high pressure to repay bonds that are maturing this year, Wen pointed out.

Local government bonds worth CNY3.65 trillion will fall due in 2023, according to a research report by China Chengxin Credit Rating Group. Around CNY3.2 trillion of refinancing bonds will likely be issued, the report said.

Local authorities will issue a total of CNY4.52 trillion of bonds this year, mainly in the first three quarters, an expert estimated.

Editors: Zhang Yushuo, Martin Kadiev