Investing in government investment funds to indirectly support strategic emerging industries has become a significant focus for local government special bond allocations this year.
It has been noted that the Guangdong Provincial Department of Finance recently announced it will issue 10 billion yuan in 30-year local government special bonds on November 28, with the raised funds directed to the Guangdong Provincial Government Investment Fund. Combined with previous issuances from Shenzhen and Guangzhou, Guangdong has allocated nearly 20 billion yuan to government investment funds through special bonds this year.
In fact, besides Guangdong, multiple provinces have been exploring the use of special bonds for government investment funds this year. Recently, Sichuan, Shanghai, and other regions have intensively disclosed special bond issuance plans, with funds all directed toward government investment funds. According to public information, the total amount of local government special bonds allocated to this sector nationwide has reached approximately 82.5 billion yuan so far this year.
Industry experts point out that directing special bonds to government investment funds opens up new directions for the use of special bond funds and injects new vitality into government investment funds. Special bond funds allocated to government investment funds offer advantages such as flexibility and lower financing costs. Additionally, they align well with the positioning of government investment funds to “invest early, invest small, and invest in hard technology.”
Multiple Regions Explore Special Bond Allocations to Government Investment Funds
In June of this year, Beijing pioneered the use of government special bonds for government investment funds, issuing 10 billion yuan in special bonds to inject into the Beijing Municipal Government Investment Guidance Fund. This innovative approach quickly gained traction in various regions, with Guangdong being particularly active.
In August, Guangzhou allocated 2 billion yuan from its 7.25 billion yuan in new special bonds to government investment funds for the first time. Shenzhen followed suit, issuing 6.52 billion yuan in 10-year special bonds on November 24, directed to the Shenzhen Municipal Government Investment Guidance Fund. When combined with the recent 10 billion yuan issuance, Guangdong has allocated nearly 20 billion yuan to government investment funds through special bonds this year.
Besides Guangdong, the Sichuan Provincial Department of Finance also plans to issue 5 billion yuan in 15-year special bonds on November 28, directed to the Chengdu Venture Investment Fund. The Shanghai Municipal Finance Bureau will issue 3 billion yuan in 15-year and 2 billion yuan in 20-year special bonds on the same day, allocated to the Shanghai Future Industry Fund and the Pujiang Innovation Source Fund, respectively.
This means that on November 28 alone, the national issuance of special bonds directed to government investment funds will reach 20 billion yuan. If successfully implemented, the total amount of local government special bonds allocated to government investment funds this year will reach approximately 82.5 billion yuan.
This trend stems from a key policy breakthrough. Previously, regulations prohibited local governments from using special bonds as funding sources for government investment funds, industrial investment funds, and other equity funds.
It was not until December 2024 that the General Office of the State Council issued the “Opinions on Optimizing and Improving the Management Mechanism of Local Government Special Bonds,” proposing to “expand the scope of special bond allocations and their use as project capital, implement a ‘negative list’ management for special bond allocation areas, and allow projects not included in the list to apply for special bond funds.” The “negative list” did not include “government investment guidance funds,” thereby paving the way for these initiatives.
More Flexible and Conducive to Leveraging Social Capital
Industry experts believe that directing special bonds to government investment funds opens up new directions for the use of special bond funds and injects new vitality into government investment funds.
Analysts suggest that using special bonds for government investment funds essentially serves as capital, but this form of utilization is more flexible and conducive to leveraging social capital compared to direct use as capital.
“On one hand, using special bonds for government investment funds means that capital injections no longer need to correspond project by project, enhancing flexibility. On the other hand, government investment funds often adopt a ‘direct investment + sub-fund investment’ model, and the sub-fund investment model can leverage social capital as capital,” the analysts stated.
Compared to other social funds such as insurance and banks, special bond funds supporting government investment funds offer certain advantages. For example, they have lower financing costs, and with the assurance of bond principal and interest repayment, local governments can better focus the funds on achieving policy objectives.</p
