China will likely unleash 2.28 trillion yuan ($319 billion) of next year’s special local bond quota by the end of December, state media reported, a sign Beijing is moving early to boost growth in 2024.
Authorities are expected to distribute 60% of next year’s special local government bond quota to provinces ahead of time, according to the Securities Daily. The newspaper cited Feng Lin, a senior analyst with Golden Credit Rating, in its report, along with several unnamed institutes it said had made the same forecast.
That implies the overall size of the next year’s special local bond quota — primarily meant for infrastructure investment — could total 3.8 trillion yuan, according to Bloomberg calculations based on figures provided in the report. That would equal this year’s quota.
The Chinese government’s decision to release the quota early would signal President Xi Jinping’s commitment to bolstering economic growth through infrastructure spending. It also suggests policymakers won’t scale back on local governments’ special bond issuance, even as they ramp up sovereign bonds to fund construction.
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The government can front-load a maximum of 60% of the next year’s special local bond quota before the new budget is approved by China’s parliament at its annual session in March. That practice allows provinces to prepare for bond sales and project launches, so the benefit of infrastructure spending impacts the economy faster.
China is on track to achieve or surpass the government’s official annual growth goal of around 5% this year, despite a difficult post-pandemic recovery. Respondents to a recent Bloomberg survey of economists expect expansion to moderate to 4.5% in 2024, putting pressure on Beijing to ramp up stimulus to boost growth.
China increased its headline deficit to the largest in three decades last month, by issuing an additional one trillion yuan of new special sovereign bonds for infrastructure spending. Some economists expect Beijing to set the deficit ratio at a relatively high level next year.