Record-high local govt bond issuance to spur infrastructure investment

China's local government bond issuance reached a record high in the first quarter as authorities allocated additional quotas for new sales as part of the more proactive fiscal policies to shore up the virus-hit economy, official data showed.

The value of local government bonds issued in March totaled 387.5 billion yuan (about $54.6 billion), according to the Ministry of Finance (MOF).

The data brought total local government bond issuance to more than 1.6 trillion yuan in the first quarter, a record high.

Among the issuance, new sales amounted to 1.5 trillion yuan, accounting for 83.5 percent of the 1.85-trillion-yuan quotas allocated by the MOF ahead of schedule to mitigate economic impacts from the novel coronavirus outbreak.

A State Council meeting on March 31 decided to increase the issuance of local government special bonds to support effective investment, stressing that priority should be given to regions with major projects and low risks.

The country will assign some of the local government speciall bond quotas ahead of schedule, and local authorities should strive to issue the bonds by the end of the second quarter, the meeting said.

As the bond sales are mainly used to fund major infrastructure projects, including railways and water conservation, analysts expect the quickening sales will pull infrastructure investment to double-digital growth.

Gao Ruidong, an analyst with Guotai Junan Securities, predicted the speciall bonds would spur infrastructure investment by around 2.5 trillion yuan to 3 trillion yuan for 2020, with infrastructure investment growth reaching 10 percent to 12 percent for the year.