(Yicai Global) Nov. 14 -- China’s local governments issued about CNY4.006 trillion (USD567 billion) of new special bonds between Jan. 1 and yesterday to promote infrastructure construction and steady the economy, topping the CNY4 trillion mark for the first time, according to market data.

Since there will be additional new special bonds issued in the second half of this month based on local government plans, said Yang Yewei, chief fixed-income analyst at Guosheng Securities’ research institute, the total amount is expected to reach about CNY4.15 trillion this year.

The finance ministry also recently released in advance new special debt quotas for next year, Yicai Global learned, with issuance set to begin as soon as January. But specific official figures for the early released quotas remain unavailable. Experts predict that it will not be less than 2022’s CNY1.46 trillion, with Yang estimating it at about CNY1.8 trillion.

The central government imposes an annual cap on bonds issued by local governments, with the figure approved at the annual National People’s Congress held in March. Since 2018, the NPC has allowed the finance ministry to release up to 60 percent of an entire year’s quota before the NPC, so as to enable the proceeds from the debt issue to come into play as early as possible.

The central government introduced the special bonds financing scheme in 2015. Nearly CNY100 billion (USD14.2 billion) were issued that year, and the amount soared in subsequent years, topping CNY3 trillion for the first time in 2020 before exceeding CNY4 trillion this year.

Special bonds, among other kinds of visible debts, are an option the government can to choose to stabilize growth amid insufficient fiscal revenue and limited scale of hidden debts, Guosheng Securities’ Yang said.

The broad-sense infrastructure investment may grow between 10 percent and 15 percent this year following a surge in the special bond issue quota, significantly higher than last year’s 0.2 percent increase, according to Feng Lin, a senior analyst at Golden Credit Rating International.

That will likely accelerate this year’s gross domestic product growth by about 1 percentage point to 1.5 percentage point, Feng told Yicai Global.

Compared with previous years, new special bond issuance has not only hit a new high this year, but also the speed of issuance is unprecedented. Most of this year’s issuance quota was basically used up in the first half, while the debt issued since October is mostly the unused balance from previous years.

Local government special bonds, made up of new special bonds and refinancing special bonds, are sovereign debt issued by provincial-level administrations for public welfare projects with certain returns.

The government fund income or special revenue corresponding to the projects is used as the fund source to pay off the bonds’ principles and interests.

Editors: Tang Shihua, Peter Thomas