(Yicai Global) April 23 -- Chinese regional governments issued 44 percent less in bonds in the first quarter amid economic recovery after a Covid-19 peak last year while refinancing is expected to increase to hit a record high this year.

Regional administrations issued CNY895.1 billion (USD137.9 billion) in bonds over the three months ended March, they said in recent reports.

The base was high. Bond issuance jumped amid the Covid-19 pandemic last year, which caused declining tax income for Chinese regions. Local governments' public budget revenue fell by 19.3 percent in the first quarter of 2020 so they issued CNY1.6 trillion (USD246.2 billion) worth of bonds during that quarter, a major increase from a year earlier.

Refinancing

Now it is time to pay back. Market participants expect new refinancing bonds to hit a record high this year. More than CNY2.5 trillion worth of government bonds are on track to expire this year and the central government is pushing regional administrations to reduce their leverage ratios, they said.

An additional CNY4.47 trillion worth of local government bonds will be issued this year, with a peak in the second and third quarters, analysts added.

Most of the borrowing goes toward paying off earlier debts. Refinancing bonds made up 96 percent of the total during this year's first quarter and notes to finance new projects tallied just CNY30 billion (USD4.6 billion), according to public data.

Bonds are predicted to account for 22 percent of local governments' fiscal revenues this year, falling slightly from last year's share of 24 percent, according to analysts.

Local administrations seem to have followed the central government's instructions to reduce their indebtedness for improved financial health as many announced the reason behind the borrowing to be “payoff off matured bonds.”

Regional administrations had CNY26 trillion (USD4 trillion) in debts as of February, approaching the alarming ratio range of 100 percent to 120 percent when comparing the sums with their annual government revenues.

Editor: Zhang Yushuo, Emmi Laine, Xiao Yi