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Local borrowing will be accelerated to support the construction of major projects and stabilize investment and the economy.

Public data shows that in the first seven months of this year, the number of local governmentBondsAbout 4.2 trillion yuan, down about 16% year-on-year. Currently, the legal channel for local governments to borrow money is to issue local government bonds. Against the backdrop of increasing contradictions between local fiscal revenue and expenditure, local governments are increasingly relying on issuing bonds to raise funds for major projects.

In the first seven months of this year, local borrowing was slower than in previous years. The Politburo of the CPC Central Committee held a meeting at the end of July to deploy fiscal policies for the second half of the year, calling for the acceleration of the issuance and use of special bonds. Experts generally predict that the issuance of local government bonds will accelerate significantly in August and September, ushering in the peak of bond issuance this year, with an issuance scale of about 2 trillion yuan, and accelerate the use of bond funds to give play to the amplification effect of government investment and promote economic operation within a reasonable range.

Where did the 4.2 trillion yuan go?

In the first seven months, local governments borrowed 4.2 trillion yuan, and where this huge amount of money was spent has attracted much attention from the outside world.

According to public data, of the 4.2 trillion yuan of local government bonds this year, the issuance scale of refinancing bonds is about 2 trillion yuan, and the issuance scale of new bonds is about 2.2 trillion yuan.

The purpose of the above-mentioned local government refinancing bonds of approximately 2 trillion yuan is very clear, namely, to repay the principal of maturing government bonds or existing debts, that is, "borrowing new to repay old", to alleviate local debt repayment pressure.

In recent years, the scale of local government debt maturing has been large, and coupled with the prevention and resolution of debt risks, the scale of refinancing bond issuance has remained high. The scale of refinancing bond issuance in the first seven months of this year was comparable to the same period last year.

In the first seven months, of the approximately 2.2 trillion yuan of new bonds issued by local governments, the scale of new special bonds and new general bonds was approximately 1.8 trillion yuan and 0.4 trillion yuan respectively. New special bonds are still the main force among new bonds, so in which areas are the approximately 1.8 trillion yuan of new special bonds in the first seven months invested?

According to the Enterprise Early Warning Data, in the first seven months of this year, the newly added special bond funds were mainly invested in the fields of municipal and industrial park infrastructure, accounting for about 34% of the total scale of special bond funds; followed by investment in transportation infrastructure such as railways, government toll roads, and rail transit, accounting for about 20%; in addition, special bond funds were also invested in shantytown renovation (about 9%), medical and health care (about 7.5%), agriculture, forestry, water conservancy (5.4%) and other fields.

Wen Bin, chief economist of China Minsheng Bank, said that from the perspective of capital investment, the infrastructure sector is still the main focus of special bonds. Among the new special bonds issued for project construction from January to July, 68.2% were invested in the infrastructure sector. Although it has dropped slightly from the first half of the year, it is 5.1 percentage points higher than the whole of last year and continues to maintain a high level. In addition, the proportion of new special bonds used as project capital has further increased from 9.5% in the first half of the year to 9.6%, which is significantly higher than 8.1% in the whole of last year. This can better play the "four ounces to move a thousand pounds" effect of special bonds and drive social investment.

Lin Zechang, director of the General Office of the Ministry of Finance, recently introduced at a press conference of the State Council Information Office that this year more new infrastructure, new industries and other fields will be included in the scope of special bond investment, and the allocation of special bond quotas will be tilted towards regions with sufficient project preparation and good utilization efficiency.

In addition, the issuance of special new special bonds has also attracted attention.

Wen Bin believes that since late June, Henan, Xinjiang, Shaanxi and other places have successively issued special new special bonds. As of the end of July, the total amount of special new special bonds disclosed has reached 253.6 billion yuan. Different from traditional new special bonds, special new special bonds do not disclose "one case and two books" (project implementation plan, financial audit report and legal opinion), and the funds raised are not used for project construction, but to repay existing debts.

He believes that this will help ease the pressure of local fiscal debt, but it will also weaken the role of special bonds in driving infrastructure investment. However, considering that there are indeed insufficient infrastructure projects that can generate sufficient cash flow, and that the 1 trillion yuan of ultra-long-term special government bonds added this year will be mainly used for the construction of "double-heavy" projects, thereby supporting the growth momentum of infrastructure, it is expected that the next stage of special new special bonds may continue to be issued, so that fiscal funds can be used more effectively.

The peak of bond issuance is coming

The issuance of new special bonds in the first seven months of this year fell by about 29% year-on-year, which is the main reason for the slow progress of local government bond issuance this year. According to this year's budget report, the annual new bond quota is about 4.62 trillion yuan, which means that from August to December, there will be about 2.4 trillion yuan of new bonds to be issued, of which 2.1 trillion yuan of new special bonds will be issued.

As the aforementioned Politburo meeting once again emphasized the need to speed up the issuance and use of special bonds, and the issuance of some local bonds in July was postponed to August, experts generally expect that August, September and October will be the peak period for local bond issuance.

Wen Bin believes that judging from the issuance plans announced by various regions, the scale of local government bond issuance in August and September is 1.36 trillion yuan, plus the planned repayment scale of 0.56 trillion yuan, it is expected that the scale of local government bond issuance in August and September will be around 2 trillion yuan, which is basically the same as the same period last year. Based on this calculation, there is still 1.11 trillion yuan of new local government bond quota left in the fourth quarter, which may be mainly issued in October.

In addition to speeding up the bond issuance progress, it is more important to make good use of bond funds and improve the efficiency of bond fund use.

The recently released "Decision of the Central Committee of the Communist Party of China on Further Comprehensively Deepening Reforms and Promoting Chinese-style Modernization" proposed, when deploying the deepening of fiscal and taxation system reform, to reasonably expand the scope of support for local government special bonds and appropriately expand the areas, scale and proportion used as capital.

Luo Zhiheng, chief economist of Guangdong Securities, said that the current quota of local special bonds for people's livelihood areas such as education and medical care is relatively limited. Reasonably expanding the scope of support for local government special bonds will help to tap into projects that meet the requirements and promote bond funds to play a more extensive leading role, especially in the public service field, which will help alleviate the problems of insufficient funds for local education, medical care, basic pension and other public services, and low quality of public services.

In addition, recently released audit reports of some provinces also revealed that the use of some new special bond funds did not meet expectations. For example, some projects were not well prepared in advance, and the projects were slow to advance; some special bond funds were idle, increasing the cost of funds; some special bond funds were not used in compliance with regulations, and the returns of some special bond projects after completion were lower than expected.