(Yicai) Nov. 19 -- Chinese local governments have announced plans in the past six months to issue special purpose bonds worth CNY52 billion (USD7.4 billion), so as to replenish investment funds that support early-stage science and technology projects.

Nine localities have announced such plans since June, according to data from China Bond Information Network. The bonds issued so far have 10 to 20-year tenures, are included in local authority budgets, and were therefore awarded the highest AAA credit rating by rating agencies.

For example, Anhui province, which has already sold bonds for this purpose, said the funds raised will mainly go to Hefei Venture Capital, with the explicit aim of providing steady, long-term financing for early-stage sci-tech companies and businesses in hard-tech sectors. 

Shenzhen’s government, which plans a CNY6.5 billion (USD922.6 million) sale of 10-year bonds on Nov. 24, said it will hand the proceeds to its investment fund.

Slower economic and fiscal revenue growth in recent years, along with pronounced spending pressures, has pushed local governments to seek new ways to finance their investment guidance funds, Wu Zhiwu, senior research and development director at CSCI Pengyuan, told Yicai.

Compared with other funding sources, like insurance investment and bank loans, issuing special bonds to raise money for government-guided investment funds has certain advantages, such as lower financing costs, Wu noted.

Wu added that because repayment of the bonds’ principal and interest is guaranteed, local governments have more freedom in choosing where the funds are invested, making it easier for them to pursue their policy goals.

Editors: Tang Shihua, Futura Costaglione