Special local bonds rev up investment

Govt funds issued ahead of schedule boost construction, manufacturing

The early and speedy issuance and allocation of this year's special local government bond quota will effectively boost infrastructure construction and help rev up economic recovery, particularly in the first quarter, analysts said.

Figures show that in January, the issuance and allocation of China's special local government bonds have been moving ahead of schedule, facilitating infrastructure projects at local levels and generating real economic activity.

Calculations from market tracker Wind Info show that in January, some 643.5 billion yuan ($94.79 billion) of special local government bonds have been issued, with 491.1 billion yuan being newly increased bonds.

Such an early and speedy issuance of special local bonds, with funds being released from these bonds, has notably mobilized the construction of a number of infrastructure projects across the country in January despite a weeklong holiday. Several infrastructure projects have recently started, according to a report by Chinese finance media resource Securities Times on Monday.

On Jan 28, the government of Shaanxi province announced the commencement of some 795 key projects for the first quarter of this year, with a total investment of 564.6 billion yuan. On Feb 1, the government of Guizhou province announced the start of construction of 687 major projects for the first quarter, with a total investment of 376.77 billion yuan.

Gao Ruidong, chief macroeconomist at Everbright Securities, said that based on information unveiled from the two sessions at the provincial and municipality level, which mostly concluded before Spring Festival, he estimates that the weighted average of fixed asset investment targets at regional levels comes in at about 8.3 percent, up by 0.2 percentage point compared with last year.

"This indicates that investment in infrastructure construction and the manufacturing sector will continue to vigorously underpin this year's growth," he said.

His view was echoed by Wang Qing, chief macroeconomic analyst at Golden Credit Rating International, who also predicts that this year, infrastructure investment will grow at a faster pace than in previous years.

Noting that this year, the allocation of funds from the special local government bond quota has arrived ahead of schedule, Wang said that since late last year, the central government has, on a number of occasions, urged for steps to ensure the effective implementation of the policy package for stabilizing the economy. The government has also required that key projects and equipment upgrading and renovation supported by fiscal and financial policies shall be better advanced to generate real economic activities.

"We believe that these indicate that infrastructure investment will continue to be robust for the first quarter and is likely to sustain two-digit growth," Wang said.

On Jan 30, when unveiling fiscal revenue and expenditure figures for last year, the Ministry of Finance said in a note on its website that special local government bonds are a key fulcrum maintaining the intensity of fiscal spending and catalyzing effective investment.

It said that this year, the government will set a reasonable amount of special local government bonds to boost investment and these efforts will be made to ensure that the special bonds will play a contributing and effective role in driving regional economic growth.