Sep 06, 2018 07:31 PM

Chart of the Day: Local Government Bond Issuance Surges

Local governments have heeded the Ministry of Finance’s call to accelerate bond issuances. A total of 883 billion yuan ($129 billion) worth of local government bonds were issued in August, up 88% year on year and a 17% increase from July, according to Caixin calculations based on government data.


Graphic: Gao Baiyu/Caixin

Officials in Beijing have been pushing local authorities to speed up the sale of special-purpose bonds to fund more infrastructure projects as the country’s economic growth slows.

Banking regulators have also introduced new measures to incentivize banks to increase their holdings in local government bonds. Banks, under the new measure, will be able to buy as many of the bonds they underwrite as they want.

There are two types of local government bonds, the general bond and the special purpose bond. Local governments issue general bonds to raise funds for general purposes, which they pay back with general fiscal revenue. Special-purpose bonds are often used to finance infrastructure projects and can only be repaid by income from those projects.

China created special-purpose bonds in 2015 to reduce the local government’s reliance on the opaque “shadow banking” sector for financing as part of a broader effort to get local government debt under control.

Contact reporter Charlotte Yang (

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