BEIJING: China is accelerating the issuance of special purpose bonds at the local government level to further boost investment, a move that experts see as key to stabilising growth this year amid mounting pressure from home and abroad.
Vice-minister of finance Xu Hongcai said at a news briefing on Tuesday that by the end of March, some 1.25 trillion yuan (US$196bil or RM830bil), or 86% of the 2022 advance quota of 1.46 trillion yuan (RM969bil) for local special purpose bonds, had been issued.
Local governments are paying great attention to reserving projects eligible for such bond-based funding, and there are currently some 71,000 projects in the pipeline, he said.
“This year, the issuance of local government special purpose bonds is moving visibly faster.
“In keeping with the requirement of project-based allocation, local governments are working promptly to match these bonds with eligible projects, so that they will generate real economy activities at the earliest possible time, catalyse greater investment and effectively boost growth,” Xu said.
He said bond allocation has been carried out only after giving due consideration to both fiscal capacity and debt level of local governments, in order to avoid regional piling of debt risks.
The scope of projects eligible for this type of bond-based funding has been expanded, Xu said. The bonds will provide more investment to improve people’s livelihoods, strengthen areas of weakness and construct “new infrastructure” and other high-level sustainable projects.
He reiterated that the advance debt quota allocated in 2021 will be issued by the end of May, and the full quota set for this year will be issued by the end of September, as per the timetable set by the state council, China’s cabinet.
A vital source of funds for local infrastructure construction projects, special bonds are what experts believe will be key to this year’s growth story.
Gao Ruidong, chief economist at Everbright Securities, noted that both the speed of issuance and the allocation level of local bonds for the first quarter have set records.
“This will quickly generate investment for the first half, underpinning steady economic performance for this year,” he said.
The number of infrastructure projects for this year is sufficient, he said. And with prompt funding, infrastructure investment will continue to grow quickly in the first half.
Noting that the recent resurgence of Covid-19 cases is having an impact on economic activity in certain regions, Xu said the ministry’s multipronged efforts will minimise the effect on bond allocation.
In a separate report, joint efforts to facilitate the healthy development of A-share companies will translate into investor confidence and long-term impetus for the stock market, experts said.
On Monday, the China Securities Regulatory Commission (CSRC), the state-owned Assets Supervision and Administration Commission (SASAC) of the state council, and the All-China Federation of Industry and Commerce jointly released a guideline of 12 measures to address the current uncertainties and challenges as well as stabilise expectations and market performance.
On Tuesday, the benchmark Shanghai Composite Index gained 1.46% with the Shenzhen Component Index up 2.05% and the tech-heavy ChiNext up 2.5%, with market mavens attributing the rises to the perception among equity players that Monday’s guideline is a positive.
The guideline stated that systematic arrangements should be optimised for long-term institutional investors. Social security, pension fund, trust, insurance and wealth management institutions are encouraged to direct more capital to equity assets, especially to quality companies’ stocks.
By adhering to the principle of “housing is for living in, not speculation”, listed property developers are encouraged to explore new development models and deal with various risks properly. All the market entities will be treated equally, and no additional conditions or invisible thresholds will be set for any company.Privately owned enterprises are encouraged to go in for lawful initial public offerings, mergers, restructuring and bond issuances. The vitality and creativity of privately owned enterprises should be boosted.
These companies should play a bigger role in terms of stabilising economic growth, stimulating innovation, providing more job opportunities and improving people’s livelihoods, the guideline stated. It is aimed to stabilise companies’ confidence, especially that of privately owned enterprises, said Shao Yu, chief economist at Orient Securities.
Meanwhile, the SASAC said it will provide support and guidance to listed state-owned enterprises on share repurchases and cash dividend payments.
Regulators have expressed support for listed company share buybacks serving employee incentive plans. Listed companies’ majority shareholders, chairpersons and supervisors should increase their exposure to the company when share prices are declining dramatically. — China Daily/ANN