July Special Bond Issuance Reaches Year-to-Date Peak, Poised to Reinforce Infrastructure Investment

According to the latest monitoring from Enterprise Early Warning Service, the issuance of new special-purpose bonds in China reached RMB 616.936 billion in July, representing an increase of RMB 89.842 billion from the previous month. This marks the highest monthly issuance total recorded so far in 2024.

A research report from Galaxy Securities highlights that capital raised through these bonds continues to be primarily allocated to project construction, with infrastructure remaining a key beneficiary. However, notable shifts have taken place this year. Within the infrastructure segment itself, a structural divergence is emerging between traditional projects and those aligned with emerging industries, as the application scope broadens. Simultaneously, the use of special bonds for land reserve projects has regained momentum under policy backing, with a pronounced emphasis on land acquisition, while real estate development has been comparatively slower. The distribution of projects also reveals an increasingly prominent role played by larger provinces, underscoring regional disparities in project responsibility.

The latest meeting of the Central Politburo set the policy tone for the second half of the year, emphasizing the need to expedite both the issuance and utilization of government bonds to enhance the efficiency of public expenditure.

On July 30, the Minister of Finance, Lan Fo’an, underscored in a Study Times article the importance of fully deploying a more proactive fiscal policy to strengthen counter-cyclical adjustments. He emphasized the necessity of accelerating the rollout of ultra-long-term special treasury bonds and local government special-purpose bonds to ensure that funds are converted into physical outputs as early as possible.

A report published by the Ministry of Finance on June 30 regarding the implementation of the 2024 central budget also stressed the urgency of advancing key fiscal policies, reinforcing inter-agency collaboration, and supporting struggling enterprises. It called for the prompt issuance of ultra-long-term and special-purpose bonds, which are expected to play a pivotal role in guiding and stimulating consumption, investment, foreign trade, and social welfare.

CITIC Securities’ chief economist Ming Ming noted that local bond issuance began to accelerate toward the end of the second quarter. Given that the third quarter is traditionally the peak season for such activity, new special bond issuance is expected to approach RMB 2 trillion in the coming months.

Despite recent momentum, Galaxy Securities pointed out that by the end of June, only 49% of the annual special bond quota had been utilized. Although issuance has gained pace since May, it still lags behind the 63.2% average recorded over the same period from 2022 to 2024. Several factors are contributing to this shortfall. First, the large-scale issuance of government bonds in the fourth quarter of 2024 alleviated pressure to issue during the first half. Second, pilot programs involving self-review and self-issuance have led to disparities in progress across different regions. Third, newer application areas for special bond funding—particularly in debt restructuring and land reserve for real estate—have diverted resources away from conventional infrastructure investment.

The report anticipates that roughly 35% of the bond quota will still be issued in the third quarter to bridge earlier gaps. While debt restructuring accounted for the majority of bond usage in the first half of the year, with approximately 80% completion, the focus of special bond funding in the second half is expected to shift toward infrastructure and real estate construction, potentially releasing a concentrated wave of investment into these sectors.