China’s weak local borrowing raises hope for more central aid

China’s local governments are hesitant or unable to borrow more, despite pressure to boost growth, leading to expectations that Beijing may take on more debt to fill the gap, Bloomberg reported on Monday.

Regional authorities plan to issue new bonds totalling 1.08 trillion yuan ($150 billion) for the first quarter, a 13 per cent decrease from the same period last year and the lowest since 2021. This figure does not include several local governments that have not disclosed their plans, including Shanghai, Guangdong, and Dalian.

Actual offerings have fallen even more, with new bonds sold by all local governments in the first eight weeks down 56 per cent compared to 2023. The slower issuance of local bonds suggests the central government may take on more leverage to fill the investment gap.

Chinese leaders aim to strengthen proactive fiscal policy and will reveal specific measures and budget deficit size at next month’s National People’s Congress session, the statement added.