China’s Ministry of Finance has released an early allocation of 1 trillion yuan of special bonds out of its 2020 quota, it said in a statement on Wednesday, confirming an Asia Times story that the government will front-load borrowing in the fourth quarter after the year’s quota had been exhausted.
The statement said the move had been made to accelerate the issuance of special bonds by local governments to finance investments that would support flagging economic growth. It said the new quota was 47% of the quota for 2019 and within the ceiling introduced by the government.
Last week, Asia Times reported China will front-load issuance in Q4 and the overall special projects quota for 2020 will be widened to between 2.5 and 3 trillion yuan.
Wednesday’s MoF statement said local governments are required to allocate the special bond quotas as soon as possible to specific projects so as to ensure funds are ready for use early next year.
China has relied more on fiscal policy to support the economy, moving away from the traditional prop of monetary policy. It has used tax and fee cuts and reductions to social security contributions as ways to provide an economic boost.
Growth in the world’s second-largest economy slid to near 30-year lows in the third quarter and recent data shows that the worst is yet to come. This month fixed-asset investment hit the lowest level on record, retail sales growth hovered around a 16-year trough and industrial output was still slowing. On Wednesday, data released showed industrial profits recorded a second straight month of decline in October.