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So far this year, local governments in China have issued approximately 2.2 trillion yuan (roughly $332.4 billion) in bonds, marking a 22% increase compared to the same period last year. This surge reflects an intensified effort to finance infrastructure projects and boost local development initiatives.
Immediately following the Chinese New Year holiday, which ended on February 23, several provinces announced new bond issuance plans. Yesterday alone, five provinces, including eastern Jiangsu, collectively issued around 139.2 billion yuan (about $20.3 billion). Today, central Hunan province and northeastern Liaoning are expected to issue approximately 89.2 billion yuan ($13 billion), based on data from local government financial departments.
This year signifies the start of the 15th Five-Year Plan. According to Wen Laicheng, a professor at the Central University of Finance and Economics with extensive expertise in local government debt, many regions are rolling out significant projects. The issuance of fresh bonds is intended to fund these initiatives, enabling projects to commence sooner and produce tangible results.
“The rapid pace of bond issuance by local authorities is a critical step toward stimulating economic growth,” Wen commented.
To expedite project launches, the Ministry of Finance allocated part of the 2026 budget quota for new local government debt last year, allowing the 2023 bond issuance to begin as early as January. To date, 32 provinces and major cities have completed their initial government bond issuance for the year.
Refinancing and Debt Management
Local government bonds are categorized into new bonds and refinancing bonds, depending on their purpose. New bonds are issued to fund infrastructure, public welfare, and other major projects, while refinancing bonds are used primarily to pay off maturing debt—essentially, borrowing new funds to cover old obligations.
Given that a substantial amount of local government debt matures this year, and ongoing efforts to address hidden debts, refinancing bonds will likely constitute a significant portion of issuance to ease repayment pressures, Wen explained.
Data from the Enterprise Early Warning Platform shows that out of approximately 2 trillion yuan issued so far, around half are new bonds and half are refinancing bonds. Of the new bonds, roughly 600 billion yuan ($87.5 billion) are special bonds allocated directly to project investments, with the rest comprising general bonds and other special bonds. Among refinancing bonds, approximately 680 billion yuan are designated for replacing hidden debts, with the remaining funds used to settle maturing debts.
Active Fiscal Policy and Lending Trends
Driven by an active fiscal stance, the scale of local government bond issuance has grown steadily over recent years. Last year, total issuance surpassed 10 trillion yuan ($1.4 trillion) for the first time. Experts predict this year’s total will also exceed that level.
A significant portion of last year’s funds was used to finance “borrowing to repay old debts,” which contributed to slower infrastructure investment growth. To stabilize investment and reverse the decline, the central government has mandated that a larger share of special bonds be dedicated to project construction this year.
In 2022, local governments issued roughly 10.3 trillion yuan ($1.5 trillion), including about 5.3 trillion yuan in new bonds and 4.9 trillion yuan in refinancing bonds, according to recent data from the Ministry of Finance.
As of the end of last year, the total outstanding debt from local governments reached approximately 54.8 trillion yuan ($8 trillion), a 15% increase over the previous year. Despite this rise, the figure remains below the 57.9 trillion yuan limit approved by the National People’s Congress. Overall, the risk associated with local government debt continues to be viewed as manageable and within safe bounds.
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