(Yicai) Dec. 5 -- China issued more than CNY10 trillion (USD1.41 trillion) in local government bonds in the first 11 months of this year, with about 62 percent of the funds used to repay maturing obligations and hidden debts, while 38 percent was directed to major project construction, according to data from the Enterprise Early Warning Platform.

The refinancing bond portion totaled about CNY4.8 trillion (USD679 billion), up around 20 percent from a year earlier, and was directly applied to repaying the principal of maturing bonds and replacing existing hidden liabilities. In addition, about CNY1.4 trillion of newly issued special-purpose bonds was also used to address hidden debt and settle overdue government payments to enterprises, bringing total debt-repayment allocations to roughly CNY6.2 trillion.

The remaining CNY3.8 trillion of new bond funds was largely earmarked for project development, including around CNY3.1 trillion of new special-purpose bonds. About 27 percent of these funds went to municipal and industrial park infrastructure, 17 percent to transportation infrastructure, 17 percent to land reserves, 12 percent to affordable housing, and 11 percent to social programs.

This year’s special-purpose bond scope expanded significantly. Previously, such bonds were generally barred from being used for land reserves, but after the restriction was lifted, more than CNY500 billion (USD70.7 billion) flowed into land reserve projects, helping stabilize the land and real estate markets. Special-purpose bonds were also allocated to government investment funds for the first time, exceeding CNY80 billion (USD11.3 billion) to support early-stage technology companies and the hard technology sector.

According to finance ministry data, China’s local government debt balance reached about CNY53.7 trillion by the end of September, remaining within the CNY57.9 trillion ceiling. Local government bonds had an average remaining maturity of 10.5 years and an average interest rate of 2.86 percent.

Yuan Haixia, director of the research institute of China Chengxin International Credit Rating, said that given the central government’s much lower debt scale, share, and ratio compared with local governments -- and far below levels in major economies such as the United States and Japan -- future leverage could shift more toward the central government.

Editor: Emmi Laine