(Yicai) Oct. 10 -- After Inner Mongolia Autonomous Region and Tianjin issued refinancing bonds, the first such sales in China for 15 months, other provincial-level regions have now come out with similar plans, showing that the central government’s drive to resolve local government debt risk is picking up pace.

Liaoning province will issue CNY87 billion (USD12.1 million) of special refinancing bonds on Oct. 12, according to information published on ChinaBond.com. Yunnan province, Chongqing city, and Guangxi province plan to sell CNY53.3 billion, CNY49.8 billion, and CNY42.2 billion of the bonds respectively on Oct. 16.

Inner Mongolia was the first mover, selling CNY66.3 billion worth yesterday, followed by the city of Tianjin with around CNY21 billion today.

The return of refinancing bond sales this year is a clear sign that the planned package of debt conversion is being implemented, said Sun Binbin, chief fixed income analyst at TF Securities. 

July's meeting of China's top leadership proposed to effectively prevent and resolve local debt risks and formulate and implement a planned package. One of the key measures is to issue special refinancing bonds to extend debt maturities, reduce interest pressures, and mitigate debt risks.

Since some local governments' budget imbalances have become more pronounced in recent years, even if debt risks in China are safe and controllable overall, some cities and counties with weak debt servicing abilities need to resolve such risks urgently.

Special refinancing bonds appear mainly in October and November, with a rough estimate of about CNY1 trillion this year, Sun added, noting that some may be sold in the first half of next year.

In total, about CNY1.1 trillion (USD151.9 billion) were sold across China by local governments between December 2020 and June last year. 

They were previously used mainly to repay the principal on maturing local debts, and the specific bonds to be repaid were usually named, according to an industry insider, but since 2020, the purpose of some of these bonds is stated as “to repay outstanding debts.”

Editor: Martin Kadiev