(Yicai Global) Dec. 27 -- Many Chinese local governments intend to start issuing local government special bonds, which are used to finance infrastructure, utility, energy and other public welfare projects, as early as next month to get major infrastructure projects underway as soon as possible and stabilize macroeconomic performance.

Over 10 Chinese provincial and municipal governments have already announced plans to release more than CNY600 billion (USD86.1 billion) worth of local government special bonds, which are made up of new and refinancing special bonds, in the first three months, according to the timetables released by these governments.

Fujian, Zhejiang and Jiangsu provinces in eastern China, southern Hainan province and central Hunan province have all said they will start issuing special bonds in January and other provincial-level regions have said they will follow in February and March.

Local governments’ newly issued debt in the first quarter is likely to tally over CNY1 trillion (USD143.5 billion), experts told Yicai Global. In the first three months of 2022, such bonds amounted to CNY1.57 trillion. And as of Dec. 26, CNY4.7 trillion had been issued by local governments this year, the most ever.

Local governments will start issuing their 2023 bond quota early in order to put the funds raised to use in major projects as soon as possible, Wen Laicheng, professor at the Central University of Finance and Economics, told Yicai Global. This will greatly help stabilize next year’s economic growth.

Whether increasing business revenue by cutting taxes or reducing fees, or by boosting expenditure in order to spur demand through infrastructure investment, both require the formation of some deficit- and debt-related support by next year’s first quarter, said Luo Zhiheng, chief economist at Yuekai Securities.

“China is not only facing declining external demand and a peak in Covid-19 cases next quarter, it is also encountering a high base line from last year’s first quarter. Therefore, effecting financial support in the first three months will not only help spur economic data, but more importantly, it will boost market confidence,” Luo said.

Usually, the finance ministry allocates the quota every March after it is approved by the National People’s Congress. The schedule means that local government bonds tend to be issued in the second half of the year, affecting financing efficiency. However, since 2018, in order to speed up their disbursement in the economy, the congress has been approving up to 60 percent of the following year’s quota ahead of time.

The central government introduced the special bonds financing scheme in 2015. Nearly CNY100 billion (USD14.4 billion) were issued that year and the amount soared in subsequent years, topping CNY3 trillion for the first time in 2020 and exceeding CNY4 trillion for the first time this year. Most of the special bonds issued are paid back by earnings from completed projects as well as fiscal income.

Editors: Tang Shihua, Kim Taylor