China issues 51.2b-yuan worth of 64 rural revitalization bonds, market on the rise

A total of 64 rural revitalization bonds, with a total value of 51.2 billion yuan ($7.99 billion), have been issued by China’s various entities as of Monday, according to media reports, reflecting a booming rural bond market as Beijing prioritizes promoting rural development and the modernization of the country’s vast rural areas.

Among which, the number of credit bond issued was 48, with a scale of 42.5 billion yuan, and most of the issuing bodies are state-owned enterprises. And another eight local government’s special rural revitalization bonds were issued, worth of 8.7 billion yuan.

Most of the funds raised were used in areas such as guarantee grain purchase and storage, smart energy facilities in rural areas, as well as rural road construction projects. Some were also used to repay outstanding debts.

For example, Shandong Hi-speed Group issued the 2021 second medium-term note (rural revitalization) in March, with an issuance scale of 1 billion yuan. The company said 300 million yuan of the funds will be used to renovate and expand a highway connecting Juye county with the city of Heze, East China’s Shandong Province. Once the project is finished, it will significantly boost transportation connectivity for local agricultural products and facilitate the integrated development of rural and urban economies.

The interest rate for rural revitalization bonds was ranged between 2 percent to 4 percent, and those bonds have a relatively high degree of rating by major credit rating agencies. News website reported that among the 48 credit bonds, 77 percent of them have a rating above AA+.

Analyst said that the credit bonds were issued in tandem with China’s national strategy on rural development. The participation of various financial organizations not only echoes the government plan but also helps them better target strategic clients.

Compared with other general credit bond, rural revitalization credit bond enjoys a “green channel” on issuance examination, which is good for its credit fundamentals. But still, the value of investing these bonds should still base on an analysis on the credit qualification of issuing body, according to analysts.

The issuing of rural revitalization bonds is part of the efforts from the country’s financial system to support government agenda of rural revitalization, a critical part of the Chinese government’s 2021-2025 work plan.

On June 1, the Rural Revitalization Promotion Law officially went into effect. In February, China’s central government unveiled the “No. 1 document” for 2021, renewing its emphasis on the country’s rural area and agricultural sector.