(Yicai) June 18 -- Bond issuance by local governments in China have slowed markedly this year, according to public data, but the rate is expected to increase in the second half.

In the first five months of the year, local governments issued a total of CNY1.45 trillion (USD199.8 billion) in new bonds, down about 35 percent from the same period of last year. It also represents just 31.3 percent of the annual total.

In March, the National People's Congress approved a new annual debt limit for localities of CNY4.62 trillion, and this has mostly been allocated to provinces and cities by now. But a financial official in one province confirmed to Yicai that the region had only recently received its new debt ceiling for this year, later than in previous years. 

The Ministry of Finance announced last December that it had allocated an advance new debt limit of over CNY2 trillion to various regions, and local authorities began bond sales as early as this January.

Due to the issuance of an additional CNY1 trillion in treasury bonds at the end of last year, most of which were used in the first half of this year, the overall progress of local government bond issuance has been slower so far this year, according to Wen Laicheng, professor at the Central University of Finance and Economics.

But to ensure the economy operates within a reasonable range and to hit the nation’s annual economic growth target, bond sales are expected to pick up speed in the second half, Wen said. The aim is to complete the annual bond issuance task mainly within the second and third quarters to stabilize investment and growth.

The issuance of special bonds accelerated significantly last month. As of yesterday, newly issued local government special bonds amounted to about CNY1.35 trillion, with CNY2.55 trillion still to be sold.

In addition, the issuance of a total of CNY1 trillion in ultra-long-term special treasury bonds also kicked off in May. So far, CNY115 billion has been issued, with sales of CNY885 billion still pending.

Editor: Tom Litting