(Yicai) Nov. 4 -- Bond issuance by China’s local governments surged 23 percent from January to October from a year earlier to CNY9.1 trillion (USD1.2 trillion), hitting a historic high for the period, according to data from the Ministry of Finance and public bond issuance records.

Most of this was issued in the first half. The monthly issuance amount has been declining since July with the exception of October, when local governments issued around CNY560 billion (USD78.6 billion), slightly more than in January.

This indicates that local government bond issuance is winding down. However, according to the Ministry of Finance and the National Development and Reform Commission, local governments were granted an additional quota of CNY500 billion (USD70.1 billion) in bonds in the middle of October.

Of this, CNY300 billion (USD42.1 billion) will be used to boost local fiscal capacity, to help local governments settle debts from existing government investment projects and clear government arrears owed to businesses. The remaining CNY200 billion will be for eligible projects in major provinces to support effective investment more precisely.

The market expects this CNY500 billion top-up to be issued in November and December, which should keep the pace of local government bond issuance relatively stable.

Of the CNY9.1 trillion borrowed in the first 10 months, about 60 percent was used to repay old debt, while roughly 40 percent went to major project construction. CNY4.4 trillion of this were refinancing bonds, a year-on-year increase of 58 percent, according to public bond data.

Overall, local government debt risks remain manageable, and the principal and interest on local government bonds are being repaid on time.

Local government debt nationwide amounted to CNY53.7 trillion (USD7.5 billion) as of Sept. 30, staying within the CNY58 trillion ceiling approved by the National People’s Congress, according to data from the Ministry of Finance. In the first three quarters, local governments paid off CNY2.38 trillion (USD334.1 billion) in the principal of maturing bonds and CNY1.11 trillion (USD155.8 billion) in interest.

Editor: Kim Taylor