Nation ups ante in front-loaded quota for local govt bonds amid NCP
Published: Feb 11, 2020 10:59 PM

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China's finance ministry announced Tuesday plans to bring forward 848 billion yuan ($121.59 billion) of this year's quota for local government bonds, in the latest sign of efforts to prop up the economy amid the fallout from the novel coronavirus pneumonia (NCP).

The ministry has front-loaded 848 billion yuan in the 2020 local government bond quota, with 558 billion yuan in general bonds and 290 billion yuan in special bonds, according to a statement posted on its website.

This adds to the recent announcement of 1 trillion yuan in special bonds, bringing the amount of the new local government quota for 2020 to 1.85 trillion yuan, the ministry said.

The authorities are expected to up the ante on the fiscal front to steady the economy, which has been under downward pressure, especially from the virus outbreak, Liu Xuezhi, a senior economist at the Bank of Communications, told the Global Times on Tuesday. 

Analysts generally expect GDP growth to slow in the first quarter of the year. 

Nine out of 20 well-known Chinese economists and market watchers recently polled by GT Source rejected the possibility of an economic expansion below 5 percent for the first quarter, while eight believed there was a chance economic growth could slip below that level. That would be the weakest quarterly growth since 1992, reflecting the impact of the viral onslaught.

The economy expanded by 6 percent in the fourth quarter of 2019, unchanged from the previous quarter, official data showed.

The issue of local government bonds at an accelerated pace is aimed at bolstering growth, Liu said. 

In January, 276 local government bonds were issued, involving 785.06 billion yuan, the highest monthly number on record, according to Liu. He forecast that the local government bond quota for the whole year might hit 4.5 trillion yuan, with 3 trillion yuan or even more expected in new local government special-purpose bonds. 

The special-purpose bonds are expected to be mostly used in wide-ranging areas such as railways and roads, among other transportation infrastructure, as well as ecological and environmental protection projects (for instance, wastewater treatment and garbage sorting), civil engineering projects, healthcare, and 5G infrastructure, Liu went on to say.

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