(Yicai) Sept. 4 -- Chinese local governments released the highest amount of bonds in August of any month so far this year at CNY1.3 trillion (USD179 billion) in order to drive investment and stabilize the economy.

The Ministry of Finance intends for local governments to issue most of their annual special bond quota, which mainly finance major infrastructure projects such as industrial parks, transport links and affordable housing, before the end of September and to use them up as soon as possible to expand investment and help steady the macroeconomy, several experts said.

In the first eight months, China's local government bond issuance climbed 3 percent from a year earlier to CNY6.3 trillion (USD868 billion), a record high for the period. Of this, new special bonds came to CNY3.1 trillion and refinancing bonds jumped 44 percent to CNY2.6 trillion.

Special bonds must be used for public welfare projects with a specific return, and although the scope of investment is quite large, it can still be further expanded, Wen Laicheng, professor at the Central University of Finance and Economics, told Yicai.

Broadening the scope of special bonds can better meet the actual conditions in different places and promote the establishment and operation of special debt projects, Wen said.

The issuance of refinancing bonds has surged, mainly due to the large amount of debt due this year at around CNY3.6 trillion (USD495 billion). Local governments have become increasingly dependent on issuing refinancing bonds to repay old debts, as fiscal revenue grows slowly and due to the concentration of debts that are maturing, experts said.

How to strengthen management and improve the efficiency of the use of special debt bonds have also become a focus for regulators in recent years. Many special bonds have not produced the expected returns due to non-compliance in investment direction, misappropriation of funds and the lying idle of funds.

Editor: Kim Taylor