China: Local government bond issuance reveals stimulus target – ING

Iris Pang, Economist at ING, points out that in China, together with a sharp fall in loan growth, M2 annual growth has slowed from 8.3% year on year in September to 8.0% in October.

Key Quotes

“What's more eye-catching is that local government bond net issuance growth has slowed down from CNY 738.9 billion to CNY 86.8 billion in October. The abrupt decline in new local government debt issuance at a time when the economy requires it the most indicates this year's new issuance of around CNY 4 trillion according to a media report citing China Chengxin Credit Rating Group might have reached this year's stimulus limit.”

“Regardless of whether the issuance is used for roll-over or new projects, it represents the local government's efforts to support the economy through fiscal stimulus.”