Guangdong heads for highest level of bond issues

Bond issues by Guangdong province are expected to set a record this year, even as the central government launches a national audit of local government liabilities to address concerns about rising debt from overly ambitious development projects.

Guangdong (excluding the Shenzhen special economic zone) plans to issue 12.1 billion yuan ($1.95 billion) in bonds this year, which would be a year-on-year jump of 40 percent, said Zeng Zhiquan, director-general of the Guangdong Provincial Department of Finance.

Zeng said the bond issues will set a record for the province. The issues will include 6.05 billion yuan in five-year bonds and another 6.05 billion yuan in seven-year debt.

The province plans to invest 8 billion yuan of the proceeds in building highways and related facilities, Zeng told lawmakers on Monday during a session of the province's legislative body in Guangzhou, the capital.

The remaining 4.1 billion yuan will be used by the province's cities and counties to support their economic development.

Some 500 million yuan will be spent on infrastructure in Guangzhou's Nansha district, which lies at the mouth of the Pearl River.

Another 1 billion yuan will finance port construction and land reclamation in the Zhuhai special economic zone in the western part of the Pearl River Delta.

Guangdong, which borders the Hong Kong and Macao special administrative regions, issued bonds valued at 30.9 billion yuan from 2009 to 2012, statistics from Zeng's bureau show. Those figures exclude Shenzhen.

The province, one of the country's economic powerhouses, issued bonds valued at 6.9 billion yuan in 2011 and 8.6 billion yuan in 2012.

Peng Peng, a senior researcher at the Guangzhou Academy of Social Science, noted that Guangdong is one of the four pilot regions that have been given permission to float local bonds to support economic development.

Guangdong must expand its investments every year to maintain economic growth, Peng told China Daily on Tuesday.

"Every year, Guangdong relies heavily on bond issues and the development of the real estate industry to help raise the large sums needed for construction," he said.

But the real estate industry has done little for Guangdong's debt-repayment capacity so far, he added.

Li Youhuan, director of the Comprehensive Development and Research Center of Guangdong Academic and Social Science, said he was not surprised by Guangdong's large bond issues.

"Guangdong, which attracts little investment from the central government, must annually issue large amounts of bonds to support its economic growth," he added.

Li Xudong, director of the Scientific Research Institute under the Guangdong provincial department of finance, said it was not important how much the government borrows. "What's more important is the government's capacity to repay the debts," Li said.

Governments can borrow the money to support their economic development if they have the capacity to repay the debts, he said.

He urged governments at all levels to spare no effort to prevent disruption in the province's financial chain.

Lan Fo'an, director-general of the Guangdong provincial auditing department, said his department is preparing to audit the province's local debts.

The local debt audit will cover all township governments in 21 prefecture-level cities in the province, with the goal of avoiding a provincial debt crisis. An audit of local debts in 2010 covered only county-level governments.

Auditors across the province have been sent to special training courses for auditing the province's local debts, a process that will start in September.

As of the end of 2010, Guangdong had debt of 750.29 billion yuan, which was still in the controllable rang, Lan said.

Guangdong's GDP reached 2.846 trillion yuan in the first six months, up 8.5 percent year-on-year and 0.5 percentage point above than the national average.

The province's GDP exceeded 5.7 trillion yuan in 2012. That was the nation's largest amount, which has been the case for 24 consecutive years.