China local governments issued net 3.96 trln yuan in special bonds in 2023

China's local governments issued a net 3.96 trillion yuan ($551.54 billion) in special bonds in 2023, exceeding the annual quota, data from the Chinese finance ministry showed on Tuesday. As the world's second-biggest economy struggles to stage a strong post-COVID rebound, analysts say the government is likely to step up spending this year to drive growth after last October allowing an additional 1 trillion yuan in sovereign bonds to be issued.

China's local governments issued a net 3.96 trillion yuan ($551.54 billion) in special bonds in 2023, exceeding the annual quota, data from the Chinese finance ministry showed on Tuesday.

As the world's second-biggest economy struggles to stage a strong post-COVID rebound, analysts say the government is likely to step up spending this year to drive growth after last October allowing an additional 1 trillion yuan in sovereign bonds to be issued. China had set a quota of 3.8 trillion yuan for 2023 special local government bonds issuance, and parliament in October let local governments front-load part of their 2024 bond quotas, which have not been announced yet.

In December, local governments issued a net 92.1 billion yuan in special bonds, the finance ministry data showed. That was about half the level of such issuance in November. As consumers remained wary of spending and businesses lacked confidence to expand investment, the government was drawing on a well-used playbook that relies heavily on government debt to fund infrastructure.

Chinese leaders agreed at a key meeting on the economy at the end of last year to run a budget deficit of 3% of gross domestic product in 2024 while other fiscal support may be covered by off-budget debt, Reuters previously reported, citing people familiar with the matter. China's central bank chief Pan Gongsheng said on Jan. 24 the bank would use various policy tools to shore up liquidity and support large-scale government bond issuance to fund investment projects.

($1 = 7.1799 yuan)