The market is concerned about the slow progress of the issuance of local government special bonds (hereinafter referred to as "special bonds") this year, with the Ministry of Finance and the National Development and Reform Commission (NDRC) speaking out in succession.
On April 23, the NDRC publicly announced on its official website that recently, the NDRC, in conjunction with the Ministry of Finance, completed the selection of local government special bond projects for 2024. Approximately 38,000 special bond projects were selected, with a demand for special bonds of around 5.9 trillion yuan for 2024, laying a solid project foundation for the issuance and use of 3.9 trillion yuan in special bonds this year.
"The next step is to focus on supervising and guiding localities to strictly adhere to project quality requirements, to accelerate the construction of projects and the use of funds, to promote the rapid formation of physical work volume, and to actively expand investment that is beneficial," said the NDRC.
Wang Jianfan, Director of the Budget Department of the Ministry of Finance, stated at a press conference held by the State Council Information Office on the 22nd that in the next step, the Ministry of Finance will work with relevant departments to guide localities to reasonably control the pace of special bond issuance, optimize the rhythm and intensity of government investment, guide the protection of funding needs for major projects, improve the performance of bond fund use, and play the leading and amplifying effect of government investment. This will consolidate and enhance the positive trend of economic recovery, and continuously promote the economy to achieve effective improvement in quality and reasonable growth in quantity.
Several fiscal and tax experts told Yicai Finance that as local special bond projects complete the review process, localities will accelerate the pace of special bond issuance. According to past practices, they will basically complete the issuance of the full year's 3.9 trillion yuan in new special bonds by the end of October, in order to quickly form a physical work volume, to better expand effective investment, and to promote economic growth.
Special bonds have become an important tool for implementing proactive fiscal policies and are one of the most direct and effective policy tools for the government to stimulate investment. During the National People's Congress in March this year, it was determined that the limit for new special bonds this year would be 3.9 trillion yuan, an increase of 10 billion yuan from last year, reflecting the fiscal policy of "moderate strengthening."
However, the progress of special bond issuance this year has been significantly slower than last year. Public data shows that in the first quarter of 2024, localities issued about 634.1 billion yuan in new special bonds, a year-on-year decrease of about 53%. The proportion of the issued amount to the annual new special bond quota (bond issuance progress) is only 16%, far lower than the 35% of the same period last year. And since April, there has been no significant acceleration in the issuance of special bonds.
The image is from the Guojin Securities Research Institute.
Wang Jianfan explained that the smaller issuance scale in the first quarter compared to previous years is partly due to the increased issuance scale at the beginning of the year in previous years to cope with the impact of special factors such as the epidemic, and is also related to the demand for project construction funds, construction conditions during the winter and spring seasons, and bond market interest rates. At the same time, we have also done a lot of work in improving the quality of special bond projects and strengthening the preparation of projects in the early stages. Overall, the annual issuance scale is still in line with expectations.
The fact that some special bond projects have not completed the review process is also considered by the market to be a major reason for the slow progress of bond issuance. In recent years, in order to improve the efficiency of the use of special bond funds, central ministries and commissions have strengthened project reviews. After localities submit special bond projects, the NDRC is responsible for reviewing and controlling the project investment areas and early work, while the Ministry of Finance strengthens the review and control from aspects such as project maturity, balance of financing benefits, and compliance of fund use.This year, there has been a new trend in the review of special-purpose bonds, with the fields of investment continuing to expand and the scope of using these bonds as project capital also broadening.
Wang Jianfan stated that this year, more fields such as new energy, new infrastructure, and new industries will be included in the scope of special-purpose bond investment. "Independent new energy storage" and "comprehensive management of key river basin water environments" will be included in the range of special-purpose bond support, guiding localities to increase support for areas such as "infrastructure of national-level industrial parks," "5G integrated application facilities," "urban village renovation," "affordable housing," and "dormitories for ordinary college students." This is to further plan significant projects that have clear economic and social benefits, strong driving effects, are eagerly anticipated by the public, and are essential to be carried out sooner or later. "Affordable housing" and similar projects will be included in the scope of special-purpose bonds used as project capital, further leveraging the catalytic role of these bonds.
"The highlight of this year's special-purpose bonds is the continued expansion of investment fields, with a focus on infrastructure in national-level industrial parks and new infrastructure, to better play the role of special-purpose bonds in stabilizing growth and filling gaps," said Wen Laicheng, a professor at Central University of Finance and Economics, to First Financial.
Additionally, this year's special-purpose bond projects will further tilt towards regions with well-prepared projects and high investment efficiency, with the eastern developed areas expected to continue receiving higher quotas.
Zhao Wei, Chief Economist at Guojin Securities, believes that due to the slow progress of special-purpose bond issuance and the drag from land transfer income, broad fiscal expenditure in March showed a significant decline. With the selection of special-purpose bond projects completed, it is expected that the issuance of new local special-purpose bonds may accelerate in May, thereby supporting an increase in government fund expenditure.
Data from the Ministry of Finance shows that in the first quarter, local government fund budget revenue at the primary level was 937 billion yuan, a year-on-year decrease of 5.6%. Local government fund budget expenditure was 1,745.3 billion yuan, a year-on-year decrease of 16.2%.