With the significant increase in the issuance of new special-purpose bonds by local governments in May, the scale of new special-purpose bonds issued in the first five months has exceeded 1 trillion yuan.
According to public data, in the first five months of this year, local governments have issued approximately 1,160.8 billion yuan in new special-purpose bonds, with 438.3 billion yuan issued in May alone, indicating a noticeable acceleration in the issuance of new special-purpose bonds.
Special-purpose bonds are an important policy tool for local governments to stabilize investment, shore up weak links, and maintain economic stability. The quota for new special-purpose bonds this year is set at 3.9 trillion yuan, an increase of 100 billion yuan compared to last year, reflecting a moderate fiscal effort to stabilize investment.
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So far this year, the progress of new special-purpose bond issuance has been significantly slower than last year. Despite the acceleration in May, the scale of new special-purpose bond issuance in the first five months of this year still decreased by about 39% year-on-year, and the issuance progress (29.8%) is still significantly lower than the average in recent years. The substantial decrease in funds raised by new special-purpose bonds compared to the same period last year has also objectively become an important factor leading to the decline in local government fund expenditures this year.
In the first five months of this year, the trillion-yuan increase in new special-purpose bonds has been mainly used for project construction. According to data from the Minsheng Bank Research Institute, about 70% of the new special-purpose bonds used for project construction in the first five months were allocated to infrastructure construction, higher than in previous years. Among them, infrastructure investment is primarily focused on areas such as municipal and park districts, railways, tracks, highways, and other transportation sectors. Additionally, in the first five months of this year, the proportion of new special-purpose bonds used as project capital is close to 10%, slightly higher than in previous years.
Local debt experts interviewed by First Financial Daily believe that this year, the Ministry of Finance has expanded the fields for special-purpose bond investment and their use as project capital, with funds from special-purpose bonds tilting towards the infrastructure sector. This is beneficial for expanding effective investment. The increased proportion of special-purpose bonds used as project capital can also better leverage the "four twos move a thousand pounds" effect of special-purpose bonds, driving social investment and better playing a role in stabilizing investment and growth.
Wang Jianfan, Director of the Budget Department of the Ministry of Finance, stated at a press conference held by the State Council Information Office on April 22 that in the first quarter of this year, localities issued special-purpose bonds within the pre-allocated quota of new special-purpose debt, mainly for the construction of key areas such as municipal construction and industrial park infrastructure, social undertakings, transportation infrastructure, and affordable housing projects identified by the Central Committee of the Communist Party of China and the State Council. These have played a positive role in strengthening foundations, shoring up weak links, benefiting people's livelihoods, and expanding investment through special bond funds.
Following the Politburo meeting of the CPC Central Committee at the end of April, which called for accelerating the issuance and use of special-purpose bonds, the issuance of special-purpose bonds in May has clearly accelerated. It is expected that most of the remaining 2.7 trillion yuan in new special-purpose bonds will be issued before the end of October, with many localities already preparing to issue bonds in June. For example, information from the China Bond Information Network shows that Guangdong will issue about 26.3 billion yuan in new special-purpose bonds on June 12, and Jiangsu plans to issue about 46.1 billion yuan in new special-purpose bonds from June 17 to 21.
As the issuance of new special-purpose bonds enters its peak period this year, how to better leverage the effect of special-purpose bond funds has attracted widespread attention.
Chu Deyin, Vice President of Anhui University of Finance and Economics, stated at a recent seminar that local governments need to enhance the efficiency of special bond project fund management, relying on information technology means such as local government debt management systems to conduct penetrating monitoring of the application of special bond projects, fund use, project management, and construction operations.The issue of idle special-purpose bond funds still exists, and in order to better leverage the efficiency of these funds, many localities have also adjusted the use of some newly added special-purpose bond funds. For instance, this year, places like Henan, Yunnan, and Ningbo have adjusted the use of some newly added bond funds. Among them, Ningbo announced in mid-May that it had adjusted the use of newly added special-purpose bond funds for 11 projects, with 7 of the original projects being bond issuance projects for this year.
Professor Wen Laicheng from Central University of Finance and Economics also stated at the aforementioned seminar that in recent years, the issuance of special-purpose bonds has maintained a relatively fast growth rate, with a large scale and an increasing maturity period. Some projects have inflated returns, and the project management level is uneven, with some funds remaining idle. In particular, more than 90% of the repayment sources for special-purpose bonds currently come from land income. With the current sluggish real estate market and the continuous decline in land transfer income, this poses a significant challenge for local governments, and there should be vigilance regarding the medium and long-term risks of special-purpose bonds.
To guard against the risks associated with special-purpose bonds, in recent years, the Ministry of Finance and other departments have continuously strengthened the supervision of these bonds, improved project selection, and focused on scrutinizing the balance of project financing and returns. In addition, they have dynamically tracked and monitored the balance of financing and returns for special bond projects. If the fund income corresponding to the special bonds changes due to internal or external environmental factors, and is insufficient to repay the principal and interest, timely dynamic adjustments should be made. Special income should be transferred from related public welfare project units to make up for the shortfall, ensuring the repayment of principal and interest of the bonds, and preventing the risk of default on special-purpose bonds.
Data from the Ministry of Finance shows that in the first four months of this year, local governments' income from the transfer of state-owned land use rights was 105.36 billion yuan, a year-on-year decrease of 10.4%.
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