September Local Debt Accelerates to Boost Q4 Infrastructure Growth
Excavators are the "standard configuration" for infrastructure construction, and for a long time, the production and sales volume of excavators have been regarded by the industry as an "economic barometer".
The recently released "CCTV Financial Excavator Index" shows that the national construction machinery startup rate in August was 50.01%, and the total working hours of national construction machinery increased by 4.40% month-on-month. The data continued the growth rate of last month and expanded slightly. Judging from the data that the startup rate in 16 provinces across the country exceeded 60% in August, the number of construction projects nationwide is accelerating significantly. Behind the acceleration of infrastructure construction, there is also financial support. In September, the issuance and net financing of local bonds both set new highs for the year. According to statistics from Minsheng Research, a total of 1.28 trillion yuan in local bonds were issued nationwide in September, an increase of 84.7 billion yuan month-on-month and 514.2 billion yuan year-on-year; the net financing was 1.11 trillion yuan, an increase of 286.4 billion yuan month-on-month and 959 billion yuan year-on-year; the completion rate was 24.5%, the highest since the beginning of the year.
Zhang Yiqun, deputy director of the Performance Management Committee of the China Society of Finance, said in an interview that the issuance progress of local bonds in September has obviously accelerated. Seizing the construction peak season of "Golden September and Silver October" to accelerate project promotion can form more investment support and a larger physical quantity, achieving a positive effect of strengthening the foundation and bottoming the economy. "With the accelerated issuance of local bonds, it will provide sufficient financial guarantees for project construction in the fourth quarter, which is conducive to accelerating the progress of project implementation and providing strong momentum to ensure the annual economic growth target of 5%."
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In the fourth quarter, infrastructure construction will stabilize growth.
In the industry's view, the further acceleration of the issuance rhythm of local bonds is expected to bring more incremental financial support for infrastructure investment. Looking at the issuance areas, in September, the issuance scale of local bonds in Jiangsu, Jiangxi, and Guangdong ranked among the top three in the country. According to statistics from Minsheng Research, a total of 29 provinces and 3 single-plan cities issued local bonds in September. Among them, the combined issuance scale of Jiangsu, Jiangxi, and Guangdong was 279.1 billion yuan, accounting for 21.7% of the total issuance. Looking at the direction of funds, the proportion of infrastructure special bonds has declined. In the first three quarters, the proportion of new special bonds issued for project construction invested in the infrastructure field was 68.3%, a decrease of 0.7 percentage points from the previous 8 months. However, in the detailed direction, the top three proportions are still municipal and park, social undertakings, and rail transit, accounting for 34.1%, 14.8%, and 11.8%, respectively. Most interviewed experts believe that the continued acceleration of local bond issuance in September will bring more incremental financial support for infrastructure investment, promoting stable growth in infrastructure construction in the fourth quarter. Yuan Shuai, executive vice president of the Rural, Cultural, and Tourism Industry Revitalization Research Institute, said in an interview with journalists that the acceleration of local bond issuance will bring more incremental financial support for infrastructure investment, which is conducive to accelerating project progress, improving infrastructure levels, and thus playing a positive role in promoting stable growth in infrastructure construction in the fourth quarter.
Bai Wenxi, vice chairman of the China Enterprise Capital Alliance, analyzed for reporters that the acceleration of local bond issuance is conducive to accelerating the construction and completion of infrastructure projects, thereby driving the development of related industrial chains, increasing domestic demand, and providing support for economic growth.
According to the conventional arrangement, after entering the fourth quarter, the issuance of local bonds will also approach the end.
Data shows that as of the end of September, there is only a quota scale of 404.2 billion yuan left for new local bonds within the year, of which the remaining quota for new special bonds is 300.7 billion yuan, and the remaining quota for new general bonds is 103.5 billion yuan. Wen Bin, chief economist of Minsheng Bank, said that it is expected that new local bonds will be basically issued before the end of October and used up before the end of the year. According to the issuance plans announced by various regions, the scale of new local bonds issued in October is 188.6 billion yuan, plus a planned repayment scale of 106.7 billion yuan, Wen Bin estimates that the scale of local bond issuance in October may be around 300 billion yuan.
A package of incremental policies
As the issuance of local bonds approaches the end, the role of proactive fiscal policy in expanding domestic demand has attracted attention. For example, implementing investment and consumption promotion policies to stimulate, in conjunction with supportive monetary policies, can effectively pull the economy back onto a良性 growth path. These measures are of great significance for promoting high-quality economic development.The Central Political Bureau meeting held on September 26 emphasized the need to increase the counter-cyclical adjustment of fiscal and monetary policies and to introduce incremental policies with greater force when deploying the next steps of economic work. Subsequently, on September 29, the State Council's executive meeting studied and deployed the implementation of a package of incremental policies. The meeting proposed that each policy should have a clear division of responsibilities, accelerate the pace of introduction and implementation, immediately launch policies that are relatively mature, and promptly carry out relevant work for policies that need further refinement, launching them in batches as they become ready. New incremental policies should be studied in a timely manner according to changes in the situation.
Zhang Yiqun estimated to reporters that the incremental fiscal policies introduced in the fourth quarter may cover multiple aspects. Firstly, the advance issuance of local bond quotas for the next year or the pre-issuance of bonds that will occupy next year's quotas could create a front-loaded effect of government investment and a strong expectation. At the same time, moderately expanding this year's fiscal deficit could increase the volume of fiscal funds to alleviate the current tight fiscal revenue and expenditure contradiction and ensure the smooth progress of various livelihood undertakings.
"To support key areas in making strategic layouts in advance, there will be direct issuance of ultra-long-term special government bonds when necessary," Zhang Yiqun added.
Zhang Xinyuan, the head of research at the Kefangde Think Tank, said that future incremental fiscal policies may include continuing to promote the issuance of local bonds, increasing fiscal expenditures, supporting the development of small and medium-sized enterprises and private enterprises, and optimizing the allocation of fiscal funds. These policies will help promote stable economic growth and the advancement of infrastructure construction.
Wen Bin stated that local bond issuance in the fourth quarter may mainly focus on special refinancing bonds. The so-called special refinancing bonds are a special type of local government refinancing bonds. They have achieved the resolution of implicit debt with bonds, "explicitly" transforming local hidden debt and strengthening risk control and management.
He told reporters that from the perspective of stabilizing growth, there is a higher possibility of increasing the deficit and issuing more government bonds; from the perspective of risk prevention, issuing special refinancing bonds can effectively alleviate local debt pressure.
Bai Wenxi estimated that before the end of the year, measures such as increasing the deficit, issuing more government bonds, and issuing special refinancing bonds may be taken to alleviate the debt pressure of local governments, with newly approved quotas possibly around 1 trillion yuan.
Regarding the issue of making up for the fiscal revenue and fund gap this year, Zhongyou Securities estimated that the incremental fiscal amount may exceed 3 trillion yuan, ensuring necessary fiscal expenditures, while applying additional incremental policy stimuli to pull the economy back onto a new path of benign growth, with an economic pull of more than 0.58 percentage points.