(Yicai) Oct. 13 -- Chinese regions sold CNY3 trillion (USD410.7 billion) of refinancing bonds to repay existing debt in the January to September period, a 41 percent jump from a year earlier, demonstrating a new push to sort out the so-called hidden debt of local governments.

Besides, thirteen provincial-level regions, including Yunnan, Inner Mongolia Autonomous Region, and Liaoning, have so far this month set out plans to issue CNY564.5 billion (USD77.3 billion) of special refinancing bonds, with other regions likely to have similar intentions.

Liaoning sold CNY87 billion (USD12.1 million) of refinancing bonds yesterday, according to information published on ChinaBond.com, and Dalian city in that province plans to issue CNY13.6 billion bonds on October 19. Yunnan, Chongqing, and Guangxi plan to sell CNY53.3 billion, CNY49.8 billion, and CNY42.2 billion, respectively, on Oct. 16.

China’s local governments had debts of CNY38.7 trillion (USD5.3 trillion) as of the end of August, according to finance ministry data. With CNY3.65 trillion due this year and their fiscal revenue squeezed, the ministry has allowed them to issue special refinancing bonds for the first time in 15 months.

The bonds sold this month will be used to resolve the hidden debt issue along with other means such as debt rollovers, said Luo Zhiheng, chief economist at Yuekai Securities.

Hidden debt refers to those liabilities that are not fully disclosed or recognized by local governments and public entities. A significant share is linked to local government financing vehicles, or LGFVs, and other off-balance-sheet issuers.

Local authorities are likely to issue more than CNY1 trillion of new refinancing bonds, mainly in this quarter and mainly by regions with high debt risk, Luo said.

More will be sold in the fourth quarter, likely easing local government debt risk while helping China meet its annual economic growth target of about 5 percent, said Wen Laicheng, a professor at the Central University of Finance and Economics.

In addition to refinancing bonds, China sold about CNY4.1 trillion of new debt in the nine months ended Sept. 30, mainly for big projects such as industrial park and transport infrastructure, social undertakings, and affordable housing. The local government also issued a record of around CNY7.1 trillion of bonds, up 11 percent from a year ago.

The average remaining maturity of local government bonds is slightly over nine years, with an average interest rate of 3.31 percent, according to finance ministry data.

Editor: Martin Kadiev