Local governments have issued more than 2 trillion yuan of bonds in the first quarter, where is the money spent?

In order to stabilize the economy, local governments borrowed more than 2 trillion yuan in the first quarter.

At present, the only legal way for local governments to borrow is to issue local government bonds. According to public data, about 2.1 trillion yuan of local government bonds were issued nationwide in the first quarter of this year, an increase of about 15.6% over the same period last year.

"This shows that the progress of local government bond issuance has been relatively fast since the beginning of this year, which also reflects the active fiscal policy to increase efficiency and increase fiscal expenditure, thereby promoting economic growth." Wen Laicheng, a professor at the Central University of Finance and Economics, told CBN.

Local government bonds are divided into new bonds and refinancing bonds according to their use. The new bonds are mainly used for the construction of major projects such as infrastructure and people's livelihood projects, and local government bonds in the first quarter of this year are mainly new bonds.

According to public data, about 1.67 trillion yuan of new local government bonds were issued in the first quarter of this year, an increase of about 6.3% year-on-year. Among them, about 1.36 trillion yuan of new local government special bonds (hereinafter referred to as "special bonds") were issued, an increase of about 4.5% year-on-year.

Special bonds are invested in public welfare projects with a certain income, and generally speaking, the income can repay the principal and interest. At present, special bonds are an important means for the government to drive the expansion of effective investment and stabilize the macroeconomy.

In recent years, the scale of special bond issuance has risen rapidly, and the scale of new special bonds has remained at a high level of more than 2020 trillion yuan since 3. The scale of new special bonds this year is about 3.8 trillion yuan, and the actual issuance progress in the first quarter (the actual amount of bonds issued accounts for the total scale) is about 36%, which is relatively fast.

So where was the 1.36 trillion yuan of new special debt funds spent in the first quarter of this year? Infrastructure construction is still the big deal.

At present, the Ministry of Finance has disclosed the investment direction of new special debt funds in the previous two months. According to the Ministry of Finance, in the first two months of this year, the new special bonds were used for municipal and industrial park infrastructure 2757.33 billion yuan (accounting for about 1538% of the total issuance of new special bonds), social undertakings 19.1320 billion yuan (accounting for about 16%), transportation infrastructure 1271 billion yuan (accounting for about 15%), affordable housing projects 753.9 billion yuan (accounting for about <>%), and agriculture, forestry and water conservancy <>.<> billion yuan (accounting for about <>%). In addition, the new special debt funds are also invested in ecological environmental protection, warehousing and logistics infrastructure and other fields.

According to data from Zhongtai Securities Research Institute, the new special bonds in March were mainly invested in municipal and industrial park infrastructure, major national strategic projects, and affordable housing projects.

Wen Laicheng said that from the perspective of new special bonds in the first quarter, it is similar to recent years, mainly focusing on municipal and industrial parks, transportation, social undertakings (medical care, education, etc.) and other fields.

In addition, unlike previous years, this year's special bonds have added two new subdivisions of investment areas, namely new infrastructure construction and new energy. The former mainly refers to cloud computing, data centers, intelligent transformation of traditional infrastructure, national and provincial public technical services and digital transformation platforms, while the latter mainly includes green and low-carbon energy bases such as public sector charging and swapping infrastructure and large-scale wind power bases.

According to data from the Ministry of Finance, in the first two months of this year, 68.0 billion yuan (accounting for about 8.14%) of new special bonds for new infrastructure and 0.2 billion yuan (accounting for about <>.<>%) for new energy projects.

Wen Laicheng believes that at present, the funds invested in new infrastructure and new energy projects are relatively small, and the proportion is relatively low. On the one hand, this is because some projects in the new infrastructure are suitable for enterprise investment, some are suitable for government investment, and something in between, so the government will be more cautious. The investment scale of new energy projects is large, the construction period is long, the projects are more complex, and projects such as photovoltaic and wind power generation have risks such as curtailment, so if the project is not mature, the local government does not dare to easily issue bonds.

Luo Zhiheng, chief economist of Guangdong Securities and president of the research institute, believes that the investment structure of debt should be optimized in the future. At present, the proportion of special debt invested in new energy and new infrastructure is very low, and increasing the investment in these fields can meet the needs of serving high-quality development on the one hand, and on the other hand, it is conducive to improving the income of the entire project.

In addition to the new special bonds, local governments issued more than 3100 billion yuan of new general bonds in the first quarter. General bonds are mainly used to raise funds for public welfare projects that have no income, and the funds are mainly invested in social undertakings, transportation infrastructure, municipal construction, agriculture, forestry and water conservancy and other fields.

In order to give full play to the effect of bond funds as soon as possible, many places have also requested to speed up the issuance and use of new bonds, especially special bonds.

For example, the Guangxi Department of Finance requires that the special bonds issued in 2022 should be used up in the first quarter of 2023, and the special bonds issued in the first quarter of 2023 should be used up in the first half of the year, so as to give full play to the role of special debt funds in promoting investment and stable growth as soon as possible.

The issuance of special bonds has been accelerated, and policy-based development financial instruments have been superimposed to raise funds for major infrastructure projects and promote the rapid growth of infrastructure investment.

According to the National Bureau of Statistics, infrastructure investment (excluding electricity, heat, gas and water production and supply) increased by 9.0% year-on-year in the first two months of this year. Among them, investment in railway transportation increased by 17.8%, and investment in public facilities management increased by 11.2%.

In addition to new bonds, according to public data, about 4400 billion yuan of refinancing bonds were issued in the first quarter of this year, a year-on-year increase of about 73%. Refinancing bonds are mainly used to repay the principal or existing debt of maturing local government bonds, that is, "borrowing new to repay the old".

"This reflects the greater pressure to repay the principal of bonds maturing this year." Wen Laicheng said.

CCXI Research reported that 3.65 trillion yuan of local government bonds will mature this year, and the scale of refinancing bonds is expected to be about 3.2 trillion yuan.

Local bond experts interviewed by First Finance and Economics believe that this year's new local government bonds are expected to reach 4.52 trillion yuan, so there will be about 2.8 trillion yuan of new bonds to be issued this year, and it is expected to basically complete the issuance in the first three quarters of this year, so as to realize the physical workload as soon as possible and promote economic operation in a reasonable range.

With the rapid increase in the scale of local government bond issuance in recent years, the balance of local government debt has also increased significantly, but the risks are generally safe and controllable.

According to data from the Ministry of Finance, as of the end of February 2023, the balance of local government debt nationwide was 2.36 trillion yuan.

In order to improve the efficiency of the use of local government bond funds and prevent debt risks, the Ministry of Finance has further strengthened local government debt management this year.

For example, this year's budget report requires that the preliminary preparation of special debt projects be done, the quality of project reserves be improved, the concentration of fund use appropriately increased, and priority should be given to supporting projects with high maturity and projects under construction. Strengthen the post-investment management of special bonds, strictly prohibit behaviors such as "substituting funds for expenditure" and "allocating them in one lump sum", improve the project management mechanism, repay the principal and interest in full and on time, and ensure that statutory bonds do not incur any risks.

Yicai Author: Chen Yijian