(Yicai) April 3 -- Local authorities in China are expected to step up the pace of bond issuance this quarter and next after a slowdown due to the central government's sale of an additional CNY1 trillion (USD138.2 billion) of sovereign debt late last year and tighter control of public investment, according to experts.

Local governments sold CNY1.57 trillion (USD217 billion) of bonds in the first quarter, a 25 percent drop from a year ago. That included CNY840 billion (USD116.1 billion) of special-purpose bonds, down 50 percent, and CNY730 billion of refinancing bonds, up 66 percent.

Special bonds are off-budget instruments often used to finance infrastructure projects and refinancing bonds usually help fund the repayment of older notes.

The goal is to issue CNY4.62 trillion of bonds this year, so most of that needs to be done by the third quarter, Wen Laicheng, a professor at Beijing's Central University of Finance and Economics, told Yicai.

Local authorities could issue about CNY1.3 trillion this quarter, said Luo Zhiheng, chief economist at Yuekai Securities. A big part of that could be special bonds as the three-month figure could make up almost 30 percent of this year's total for this type of debt, up nearly 6 percentage points from a year ago.

The first-quarter slowdown was brought about by the central government's issuance of CNY1 trillion of treasury bonds in the fourth quarter of last year, with localities using the proceeds this year, Wen explained.

The decline also had something to do with the fact that the provincial-level regions facing bigger debt pressures need to strictly control low-efficiency investments, according to Luo.

Luo said as much as CNY3 trillion of local government bonds will mature this year, so regions need to step up their refinancing bond sales. Special refinancing bonds are expected to amount to CNY800 billion or even CNY1 trillion. Localities had a total balance of CNY40.7 trillion (USD5.63 trillion) of bonds as of Dec. 31, CNY1.4 billion below the debt ceiling.

Analysts are keeping a close eye on how regions use their new funding, as the nation aims to fuel growth while controlling so-called hidden debts. This year's central government work report said that the scope of investment could be reasonably expanded while borrowed funds should be used in areas with adequate project preparation and high investment efficiency.

Luo said that regions should prioritize infrastructure investment, industrial upgrade, scientific and technological innovation, environmental protection and governance, and other crucial areas. They should also guide private capital into these projects, he said.

China should enhance regulation of local government spending to increase efficiency and avoid defaults once new projects are up and running, Wen added.

Editors: Zhang Yushuo, Emmi Laine