(Yicai) Jan. 5 -- Shandong province in eastern China issued this year’s first batch of Chinese local government special-purpose bonds today worth CNY72.3 billion (USD10.3 billion), according to the province’s department of finance. This marks the start of what is expected to be trillions of Chinese yuan, equivalent to hundreds of billions of US dollars, in special local bond issuance nationwide this year, aimed at jumpstarting local infrastructure projects.

So far, 27 provincial-level regions or major cities, including Shandong province, have disclosed their bond issuance plans for the first quarter of 2026, with a combined issuance amount of approximately CNY2 trillion (USD286.4 billion), according to data from the Corporate Early Warning Network.

China’s annual quota for local government special-purpose bonds requires approval at the National People's Congress in March each year. However, since 2019, the State Council has been authorized by the NPC’s Standing Committee to release part of the next year’s new bond quota in advance. This allows local governments to issue bonds early in the year and support economic growth sooner.

Over the past two years, the special-purpose bond quotas pre-allocated by the Ministry of Finance have been equal to around 60 percent of the previous year’s total, Hu Hengsong, executive deputy general manager at Caida Securities, told Yicai. If the same ratio is applied this year, the pre-allocation quota could reach CNY3.1 trillion (USD446.7 billion). This would provide ample funding for infrastructure projects starting in the first quarter and would align with the policy goal of front-loading fiscal support.

Shandong’s department of finance also said that today’s issuance included CNY46.7 billion (USD6.7 billion) in new special-purpose bonds and CNY25.6 billion (USD3.6 billion) in special refinancing special-purpose bonds to replace hidden local government debt. This means this year's nationwide issuance of CNY2 trillion (USD286.4 billion) in special refinancing special-purpose bonds has officially got underway.

Local government special-purpose bonds fall into two categories, namely new special-purpose bonds, which are mainly used to fund public welfare projects with stable expected returns, and refinancing special-purpose bonds, which are used to repay the principal and interest of maturing special-purpose bonds as well as special refinancing special-purpose bonds that are approved by the Standing Committee of the National People's Congress to swap out hidden debt.

Local governments issued a total of CNY2.8 trillion (USD400.9 billion) in special-purpose bonds in the first quarter of 2025, including about CNY1.2 trillion (USD171.8 billion) in new bonds and CNY1.6 trillion (USD229.1 billion) in refinancing bonds, according to data previously released by the Ministry of Finance.

Editors: Tang Shihua, Kim Taylor