Beijing rues jump in local government bond issues

Funds sought by local governments in China to tackle their debts amounted to about 5.9 trillion yuan (HK$6.37 trillion) this year, more than 50 percent higher than the planned scale, according to the country’s state economic planner.

The National Development and Reform Commission said a total of 38,000 projects were scutinized and received approval for resolutions this year, after it and the Ministry of Finance jointly filtered through local government special bonds.

The 5.9 trillion yuan sought is two trillion yuan higher than planned.

The authorities will focus on supervising and guiding local governments in controlling project quality and speeding up construction, in addition to enhancing usage efficiency of funds.

Meanwhile, China’s off-the-books local government debt borrowing costs drop to a record low of 2.83 percent as investors bet on bailout.

In the first half of 2023, local government financing vehicles were paying coupons of well above 4 percent as concerns about the risk of potential defaults mounted. The average coupon this month on new debt fell to just 2.83 percent – the lowest level in data going back to 1999 collected by Bloomberg.

Externally, the United States is drafting sanctions that threaten to cut some Chinese banks off from the global financial system in the hope of stopping Beijing support for Russia’s military production, the Wall Street Journal reported Monday, citing insiders.

With Secretary of State Antony Blinken due to visit this week, it remains to be seen whether this financial threat will dent Sino-Russia trade that is enabling Moscow to rebuild its military after losses in Ukraine, the report said.

In other news, Chinese universities and research institutes recently obtained high-end Nvidia artificial intelligence chips through resellers, despite a widening US ban last year.

A Reuters review of hundreds of tender documents shows 10 Chinese entities acquired the chips embedded in server products made by Super Micro Computer, Dell Technologies and Taiwan’s Gigabyte Technology.