A pick up in credit growth and fiscal easing will see China issuance rise to a net 12-13 trillion bonds next year from 11 trillion in 2019, Standard Chartered Bank said in a report. The growth will be led by central and local government borrowing to fund a rise in the deficit, although as a percentage of GDP it will be static.

It is with noting that the local government project bond quota is likely to increase to CNY 3.0-3.1 trillion in 2020 from 2.15 trillion in 2019. This is a more aggressive forecast than that made by AXA Investment Managers, after the quota for 2019 was exhausted. “We expect SOEs and local government financing vehicles to continue to dominate credit supply, while net issuance by privately owned enterprises is likely to return to positive territory in 2020 from -CNY 103bn YTD,” it said.