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Local government special debt boosts major projects to start construction as expected

Author: Lee Yuan Source: Shanghai Securities News Published: 2019-10-25

After entering the fourth quarter, with the help of special debts from local governments, a wave of major project starts was ushered in. Major projects with investment scales of tens of billions of yuan have been concentrated in Jiangsu, Hubei, Jiangxi, and Henan.

Many people in the industry believe that with the steady tone of investment, the issuance of special bonds will further expand effective investment. It is expected that the number of new special bond issuances in the fourth quarter will be about 100 billion yuan. Subject to debt and financial constraints, infrastructure investment will be structured. The high-speed rail, rail transit, and municipal facilities and other infrastructure construction areas that are subject to rapid application growth deserve attention.

The effect of increasing the issuance of special bonds has appeared

The National People's Congress held on September 4 required that precise measures be taken to strengthen the "six stability" work, and determine measures to accelerate the issuance and use of special bonds issued by local governments to drive effective investment to support shortfalls and expand domestic demand.

Public data shows that as of September 30 this year, the total issued bonds of 31 provinces (autonomous regions and municipalities) and 6 cities with separate plans in the country amounted to 418.2 billion yuan. Among them, general bonds were 1,677.6 billion yuan, and special bonds were 2,464.6 billion yuan. In terms of bond use, new bonds were 3,033.8 billion yuan, refinancing bonds were 1,099.2 billion yuan, and replacement bonds were 11,92 billion yuan.

The latest data from the National Bureau of Statistics shows that infrastructure investment (excluding electricity, heat, gas and water production and supply) increased by 4.5% year-on-year in the first nine months of this year. The previous year's growth rates of infrastructure investment in August and July were 4.2% and 3.8% respectively. The growth rate of infrastructure investment has gradually picked up, and the effect of increasing the issuance of special bonds has already appeared.

According to the research team of the local government and urban investment industry of China Credit Rating, some provinces and cities have planned to use the credits issued in advance within the year, but subject to the "Budget Law" and Document No. 43, the special debt balance of each province cannot exceed the debt limit during the year, so In the fourth quarter, the theoretical maximum issuance scale of newly-added special bonds was 1.19 trillion yuan. Considering that unused credits are concentrated in developed regions with weak bond issuance and project reserve and construction conditions, it is estimated that the amount of new special bonds issued in the fourth quarter will be around 200 billion to 300 billion yuan.

Mao Shengyong, a spokesman for the National Bureau of Statistics, recently revealed that in the next step, special debt will gradually form a practical workload and gradually implement these projects. During the issuance process, the central government or relevant departments have taken into account the local debt carrying capacity. Local government debt is classifiedly managed. Where the debt level is higher, the amount may be smaller, the debt repayment ability is better, the economic development potential is greater, and the development level. Where there are better, better project profit prospects, the amount of special debt may be higher. Through the issuance of special bonds, it is hoped that private capital will be better driven to do a good job in infrastructure construction together.

Centralized start of major projects in many places

With the help of special debt, the market expects that major projects will start in the fourth quarter.

Since October, the second major industrial project of Jiangsu Huaian in 2019 has started intensively, involving 102 projects with a total investment of 61.931 billion yuan; Dengfeng, Henan, has signed major investment invitation projects in the second half of 2019, involving a total of 14 major projects. The total contracted value is 14.78 billion yuan, covering many fields such as cultural tourism and service industry, general aviation, etc. The major industrial project in Ji'an, Jiangxi, is under construction for the third time, with a total investment of 34.57 billion yuan in 76 major industrial projects in the city.

In addition, Wuhan, Hubei announced that it will accelerate the construction of more than 1611 billion yuan in projects and start another 250 major projects during the year.

Industrial Securities said in the latest research report that in the first two weeks of October, the projects approved by the National Development and Reform Commission increased by 56.4%, of which the projects declared by local governments increased by more than 28% year-on-year, continuing the high growth since September, and local investment willingness. Continue to pick up.

According to the reporter of the Shanghai Securities Journal, some localities have completed the declaration of three batches of special bonds, and there are places where the fourth batch of project declarations will be started soon. Guided by the policy of “funds follow the project”, the future investment of financial funds may be closely related to the start of existing projects and the declaration of new projects.

Yangtze River macro solid income Zhao Wei's team analyzed and pointed out that from the previous public data, during the start of the stock projects, major transportation projects or the focus of promotion. Judging from the application of new projects, the declaration value of new-type transportation projects such as high-speed rail / intercity and rail transit has increased rapidly.

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