Background - Local government special bonds are important policy tools for stabilizing investment, addressing shortcomings, and preventing risks. The issuance scale of special bonds in China has increased significantly from less than 100 billion yuan in 2015 to over 4 trillion yuan in 2022, with an expected increase to approximately 4.4 trillion yuan by 2025. The management and utilization of special bond funds have become increasingly important due to the expansion of their scale [1] Main Content and Interpretation - The new regulations clarify the boundaries of repayment responsibilities for special bonds, accounting treatment for different types of project units, information reporting requirements, and the handling of new and old accounting methods [2] Clarification of Repayment Responsibility Boundaries - The new regulations categorize project units into administrative and enterprise types, determining repayment responsibilities based on project implementation plans or financing balance agreements. This change clarifies that repayment obligations are not automatically assigned based on the identity of the project unit, thus reducing the risk of hidden debts [3] Accounting Treatment for Different Types of Project Units - The regulations specify accounting treatments for administrative and enterprise project units regarding the acquisition of special bond funds, asset construction, and project income [4] Reporting Requirements for Special Bond Projects - Project units are required to submit "Special Bond Project Investment Tables" and "Repayment Situation Tables" to enhance transparency and accountability in the management of special bond funds [8] New and Old Accounting Method Transition - Administrative project units must transition existing special bond funds to comply with the new regulations, ensuring proper accounting treatment and reporting [9] Impact on Special Bond Projects and Recommendations Financial Risk Visibility - The regulations enhance the visibility of financial risks, compelling local governments to conduct thorough project planning and risk assessments before selecting project units. This shift emphasizes the need for careful management and oversight to mitigate repayment risks [10][11] Lifecycle Management of Project Assets - The regulations promote comprehensive lifecycle management of project assets, requiring detailed reporting on the status of special bond projects, funding sources, and repayment situations. This approach aims to improve asset quality and funding efficiency [12] Stricter Debt Management in High-Risk Areas - High-risk regions will face stricter debt management requirements, necessitating careful monitoring of debt levels and repayment obligations. This increased transparency will aid in dynamic supervision by higher-level governments [13][14] Visualization of Funding Utilization Efficiency - The use of special bond funds has diversified, with allocations now extending to debt resolution, land reserves, and other areas. In the first eight months of 2025, the issuance of new special bonds reached 3.26 trillion yuan, with a significant portion allocated for various purposes [15][16] Shift from Scale Expansion to Quality Improvement - The regulations encourage local governments to shift their focus from merely expanding the scale of special bond issuance to enhancing the quality and precision of fund allocation, ultimately improving the efficiency and effectiveness of public investments [17]

Core Viewpoint - Local government special bonds, ultra-long-term special treasury bonds, and central budgetary funds are the three core funding sources for promoting major projects, each with distinct characteristics and requirements for application and approval processes. Funding Source Comparison Ultra-Long-Term Special Treasury Bonds - Support areas include national strategic directions, regional coordinated development, food production enhancement, technological self-reliance, and ecological safety projects. Specific investment focuses on technology research, green infrastructure, and public welfare systems [1]. Local Government Special Bonds - Key support directions include traditional infrastructure, energy projects, municipal infrastructure, social services, and new infrastructure projects. The core requirement is that projects must generate stable government revenue to cover bond principal and interest, with a coverage ratio of at least 1.2 [2]. Central Budgetary Investment - Focuses on public welfare projects, rural development, major infrastructure, social services, and ecological civilization projects. The requirement is for projects to be purely public welfare with significant social benefits but not necessarily economic returns [3]. Application Requirements and Processes Special Treasury Bonds Application Process - The application process involves several steps, including notification from the state, project selection by provincial departments, preparation of application materials, and approval by national departments. A new feature for 2025 is the establishment of a separate application channel with a "report and review" mechanism [4]. Special Bonds Application Process - Applications are conducted throughout the year with three batch submissions. The process includes project planning, inclusion in national and local project databases, and joint reviews by provincial departments [6]. Central Budgetary Investment Application Process - Applications are typically submitted in two batches each year. The process includes notification from the National Development and Reform Commission, preparation of materials, initial reviews by local departments, and final approval by national authorities. In 2025, an online approval platform will be fully implemented [7]. Application Considerations - Applications for special treasury bonds must align with policy requirements, ensure sufficient preparatory work, and avoid overlap with central budgetary investments [8]. - Projects must be new or under construction, with new projects expected to start by the end of 2025, and existing projects must be nearing completion [9]. - Projects should not include prohibited content such as real estate development or performance projects [10]. - A clear funding plan must be presented to ensure complete funding closure for the project [10]. Successful Case Studies Special Treasury Bonds - A project for high-standard farmland construction received 800 million yuan in special treasury bonds, aligning with national food security strategies [78]. Special Bonds - A smart parking project with a total investment of 500 million yuan successfully issued 300 million yuan in special bonds, demonstrating a clear revenue model [78]. Central Budgetary Investment - A new compulsory education school project received 50 million yuan in central budgetary investment, addressing urgent educational needs [78]. Choosing Funding Channels - Projects with stable revenue should consider special bonds, while those with no revenue but strategic importance should look at special treasury bonds. Purely public welfare projects should apply for budgetary investments [79]. - For large projects, a combination of funding sources may be beneficial, such as using budgetary investment for public welfare components and special bonds for revenue-generating parts [79]. 2025 Application Recommendations - Stay updated on national policy trends, prepare project materials in advance, and enhance communication with supervisory departments to improve application success rates [79].

Group 1 - The Ministry of Finance has arranged a total of 1.5 trillion yuan in special long-term bonds over the past two years to promote "dual heavy" construction [1] - In the past five years, a total of 19.4 trillion yuan in local government special bonds has been allocated to support 150,000 construction projects [1] - The central budget has invested 3.3 trillion yuan to support infrastructure construction in areas such as water conservancy and transportation, effectively leveraging government investment to stimulate social investment [1]

Core Viewpoint - The Chinese government has significantly increased its fiscal policy measures since the start of the 14th Five-Year Plan, focusing on both short-term economic stabilization and long-term development goals [1][2]. Group 1: Fiscal Policy Measures - The deficit rate has risen from 2.7% to 3.8% since the beginning of the 14th Five-Year Plan, with a further increase to 4% this year [1]. - A total of 19.4 trillion yuan in new local government special bonds has been allocated [1]. - Over 1 trillion yuan in new tax reductions and deferred tax payments have been implemented, expanding fiscal policy space [1]. Group 2: Policy Tools and Focus - The fiscal policy toolbox has become more diverse, utilizing government bonds, tax incentives, fiscal subsidies, and special funds to enhance the multiplier effect of policies [1]. - The government has creatively issued ultra-long special bonds to support comprehensive domestic demand expansion [1]. - Fiscal measures are increasingly targeted at addressing economic bottlenecks, such as a one-time allocation of 6 trillion yuan for replacing existing hidden debts, alleviating local debt repayment pressures [1]. Group 3: Future Fiscal Policy Outlook - The government plans to maintain a balance between risk prevention and development promotion, ensuring that there is still ample room for future fiscal policy actions [2]. - Continuous policy stability and flexibility will be prioritized, with an emphasis on proactive measures and timely adjustments based on economic conditions [2].

Core Viewpoint - The Chinese government is committed to maintaining a proactive fiscal policy to support high-quality economic development, with sufficient room for future fiscal policy adjustments [1][4]. Group 1: Fiscal Policy and Debt Management - The Minister of Finance, Lan Fo'an, stated that the government's debt level is within a reasonable range, with a total debt of 92.6 trillion yuan and a debt-to-GDP ratio of 68.7% as of the end of last year [1]. - The government plans to issue 5 trillion yuan in special bonds to inject capital into large commercial banks, which is expected to leverage approximately 6 trillion yuan in credit [2]. - Over the past two years, 1.5 trillion yuan in long-term special bonds have been allocated to promote "two重" construction [3]. Group 2: Fiscal Strength and Expenditure - Since the beginning of the "14th Five-Year Plan," the fiscal deficit ratio has increased from 2.7% to 4%, with new local government special bond quotas totaling 19.4 trillion yuan and tax reductions exceeding 1 trillion yuan [4]. - The national fiscal strength has significantly increased during the "14th Five-Year Plan," with general public budget revenue expected to reach 106 trillion yuan, a 19% increase from the previous five-year period [6]. - Total public budget expenditure is projected to exceed 136 trillion yuan, marking a 24% increase compared to the "13th Five-Year Plan" [6]. Group 3: Social Welfare and Public Spending - During the "14th Five-Year Plan," nearly 100 trillion yuan has been allocated for social welfare, with significant investments in education (20.5 trillion yuan), social security (19.6 trillion yuan), healthcare (10.6 trillion yuan), and housing security (4 trillion yuan) [7]. - The government has also allocated 1 billion yuan for childcare subsidies and 200 million yuan for gradually implementing free preschool education [7]. Group 4: Economic Contribution and Stability - Over the past four years, China's contribution to global economic growth has remained around 30%, with an average economic growth rate of 5.5% [8]. - The central government has arranged nearly 50 trillion yuan in transfer payments to local governments during the "14th Five-Year Plan," ensuring stable local fiscal operations [9].

Core Viewpoint - The Chinese government is committed to maintaining a proactive fiscal policy to support high-quality economic development during the "14th Five-Year Plan" period, with ample room for future fiscal policy adjustments [1][4]. Fiscal Policy and Economic Support - The Ministry of Finance plans to enhance the continuity, stability, flexibility, and foresight of fiscal policies, ensuring timely adjustments in response to changing economic conditions [1][2]. - A special bond issuance of 500 billion yuan is aimed at injecting capital into major commercial banks, which is expected to leverage approximately 6 trillion yuan in credit [2]. Fiscal Measures and Investments - Over the past two years, 1.5 trillion yuan in long-term special bonds have been allocated to promote "two重" construction, with a total of 19.4 trillion yuan in local government special bonds arranged over five years to support 150,000 construction projects [3]. - The fiscal deficit ratio has increased from 2.7% to 4% during the "14th Five-Year Plan," with over 10 trillion yuan in new tax reductions and refunds [3]. Fiscal Strength and Expenditure - The national fiscal strength has significantly improved, with general public budget revenue expected to reach 106 trillion yuan, an increase of 17 trillion yuan (approximately 19%) compared to the "13th Five-Year Plan" [5]. - Total public budget expenditure is projected to exceed 136 trillion yuan, marking a 24% increase from the previous five-year period [5]. Social Welfare and Public Spending - During the "14th Five-Year Plan," nearly 100 trillion yuan has been allocated for social welfare, including 20.5 trillion yuan for education, 19.6 trillion yuan for social security and employment, and 10.6 trillion yuan for health care [6]. - The government has also allocated 1 trillion yuan for childcare subsidies and 200 billion yuan for gradually implementing free preschool education [6]. Economic Contribution and Growth - Over the past four years, China's contribution to global economic growth has remained around 30%, with an average economic growth rate of 5.5% [7][8]. - The central government has arranged nearly 50 trillion yuan in transfer payments to local governments during the "14th Five-Year Plan," ensuring stable local fiscal operations [9].

Group 1 - The Ministry of Finance announced the arrangement of 1.5 trillion yuan in special long-term bonds over the past two years to promote "dual heavy" construction [1] - A total of 19.4 trillion yuan in local government special bonds has been allocated over the past five years, supporting 150,000 construction projects [1] - Central budgetary investment of 3.3 trillion yuan has been arranged to support infrastructure construction in areas such as water conservancy and transportation, effectively leveraging government investment to stimulate social investment [1]

Core Insights - The article highlights the successful implementation of a policy to utilize special bonds for land reserve, aimed at revitalizing inefficient land and optimizing spatial layout [1] - The case of Suining's New Oasis Dyeing Company illustrates a model for effective land use, enhancing public welfare, upgrading industries, and strengthening enterprises [1] Project Background - The project addresses historical challenges and the demands of modern development [2] Company Overview - New Oasis Company, established in 2002, is a significant private textile dyeing enterprise in Suining, occupying 186 acres with an annual output value and stable tax contributions of approximately 20 million yuan [4] - The company faced increasing complaints from surrounding residents due to emissions, despite meeting environmental standards, leading to a typical "NIMBY" issue [4] Challenges and Solutions - Since 2017, the local government has attempted to relocate the company but faced obstacles such as funding gaps and high relocation costs [5] - In 2024, the government seized the opportunity of the renewed policy on special bonds to prioritize the relocation and land reserve of New Oasis [5] Implementation Strategies - A project task force was established to address core challenges related to land reserve pricing, expected revenue, and planning adjustments [6] - The local government proactively applied to be among the first pilot projects for special bond applications, engaging with various departments and the company to understand core needs [7] - Efficient processes were established for land reserve planning, ownership investigation, and pricing, with the total cost for land reserve estimated at approximately 180.61 million yuan [8] - A closed-loop management system was implemented to ensure fund traceability and risk control [9] Outcomes - The timely injection of special bond funds significantly activated the New Oasis relocation project, enhancing land value and generating expected land transfer revenues of about 435 million yuan [10] - Environmental issues were resolved, benefiting approximately 52,000 residents [10] - The company successfully upgraded to a modern textile dyeing industrial park, expanding its operations from dyeing to a full industrial chain [10] - The new facility is projected to achieve annual sales of 1.3 billion yuan, contributing around 50 million yuan in taxes and creating approximately 200 new jobs [11] Lessons Learned - The use of special bonds is a powerful tool for activating land resources and promoting the transformation of traditional industries [11] - Rapidly seizing policy opportunities is crucial for project success [12] - Innovative approaches to funding challenges can effectively resolve relocation issues [13] - Comprehensive and regulated operations ensure fund safety and effectiveness [14] - A focus on integrated benefits across economic, social, and environmental dimensions leads to multiple wins [14]

Core Viewpoint - The recent policy shift allows local governments to allocate special bonds to government investment funds, enhancing the leverage effect of fiscal funds and attracting more social capital to support the real economy and industrial upgrades [5][6]. Group 1: Special Bonds Allocation - In August, several local governments announced the allocation of special bond funds to government investment funds, including Jiangsu (90 billion), Guangzhou (72.5 billion), Ningbo (50 billion), and Shaanxi (50 billion) [3][4]. - Beijing and Chengdu have also initiated similar practices, with Beijing planning to issue 100 billion in special bonds for its government investment guiding fund and Chengdu establishing a future industry fund exceeding 1 trillion [4]. Group 2: Policy Changes - The previous regulation prohibited the use of special bonds for government investment funds, but recent policy adjustments have removed this restriction, allowing for deeper integration of special bonds and funds [5]. - The State Council's recent guidelines have expanded the scope of special bonds, enabling them to be used for projects not included in a negative list, thus facilitating their application in various sectors [5]. Group 3: Fund Activities - The Shanghai Future Industry Fund, with a scale of 100 billion and a duration of 15 years, focuses on supporting future industries such as manufacturing, information, materials, energy, space, and health [6]. - The fund has actively invested in multiple private equity firms and has broadened its registration restrictions, responding to national guidelines aimed at promoting high-quality development of government investment funds [6].

Report Summary 1. Report Industry Investment Rating No information provided regarding the industry investment rating. 2. Core Viewpoints - The previous trading day saw a general decline in Treasury bond futures prices, with the T2512 contract down 0.04% and a decrease in open interest [2]. - The IRR of the CTD bonds corresponding to the main contracts of each Treasury bond futures was at a low level, indicating no arbitrage opportunities [2]. - Short - term market interest rates showed mixed trends, with the SHIBOR 7 - day rate down 0.7bp, the DR007 rate down 0.43bp, and the GC007 rate down 1bp [2]. - Yields of key - term Treasury bonds in China showed mixed trends, with the 10Y Treasury bond yield rising 0.01bp to 1.83%, and the long - short (10 - 2) Treasury bond yield spread at 36.2bp [2]. - In the overseas market, the 10Y US Treasury bond yield rose 5bp, the 10Y German Treasury bond yield rose 3bp, and the 10Y Japanese Treasury bond yield fell 1.8bp [2]. - Treasury bond futures prices have stabilized as market liquidity has eased and the equity market has fluctuated more. However, the stock - bond seesaw effect continues, and attention should be paid to the impact of equity market changes on bond market sentiment [3]. 3. Summary by Relevant Catalogs Futures Market - **Price and Volume Data**: The prices of Treasury bond futures contracts such as TS2512, TS2603, TF2512, etc. declined, with decreases ranging from - 0.01% to - 0.20%. Open interest for some contracts decreased (e.g., T2512 decreased by 1747), while others increased (e.g., TS2603 increased by 193). Trading volumes varied among different contracts [2]. - **Spreads**: The inter - delivery spreads of TS, TF, T, and TL contracts were 0.054, 0.100, 0.265, and 0.330 respectively, with some spreads changing compared to the previous values [2]. - **IRR**: The IRR of the CTD bonds corresponding to the main Treasury bond futures contracts was at a low level, indicating no arbitrage opportunities [2]. Spot Market - **Short - term Market Interest Rates**: Short - term market interest rates showed mixed trends. SHIBOR 7 - day, DR007, and GC007 rates decreased, while GC001 rate increased [2]. - **Chinese Key - term Treasury Bond Yields**: Yields of key - term Treasury bonds in China showed mixed trends. The 10Y Treasury bond yield rose 0.01bp to 1.83%, and the long - short (10 - 2) Treasury bond yield spread was 36.2bp [2]. - **Overseas Key - term Treasury Bond Yields**: In the overseas market, US and German Treasury bond yields generally rose, while Japanese Treasury bond yields fell. The 10Y US Treasury bond yield rose 5bp, the 10Y German Treasury bond yield rose 3bp, and the 10Y Japanese Treasury bond yield fell 1.8bp [2]. Macro News - **Central Bank Operations**: On September 2, the central bank conducted 255.7 billion yuan of 7 - day reverse repurchase operations, with a net withdrawal of 150.1 billion yuan. In August, MLF had a net injection of 300 billion yuan, PSL had a net withdrawal of 160.8 billion yuan, and the open - market buy - out reverse repurchase had a net injection of 300 billion yuan [3]. - **Fiscal Policy**: The Ministry of Finance and the State Taxation Administration announced four tax - exemption measures to support the operation and management of state - owned equity and cash income transferred to the social security fund, which will directly increase the investment return rate of the social security fund [3]. - **Real Estate Policy**: The work of using local government special bond funds to acquire idle land has continued to advance. As of the end of August, the number of idle land parcels to be acquired was 4,574, with an area of over 2.3 billion square meters, and the total amount of land to be acquired was over 610 billion yuan, with an actual issuance of about 175.2 billion yuan [3]. - **Overseas News**: US President Trump announced an appeal to the US Supreme Court regarding the global tariff case. The US ISM manufacturing index in August was 48.7, lower than the market expectation of 49 [3]. Industry Information - **Money Market Interest Rates**: On September 2, most money market interest rates showed mixed trends. The weighted average interest rate of pledged repurchase in the inter - bank market for the 1 - day variety increased by 0.19BP, and the 7 - day variety decreased by 0.79BP [3]. - **US Treasury Bond Yields**: US Treasury bond yields generally rose. The 2 - year yield rose 1.85bp, the 3 - year yield rose 3.10bp, the 5 - year yield rose 2.77bp, the 10 - year yield rose 3.50bp, and the 30 - year yield rose 3.70bp [3].