Local governments in China sold a record amount of bonds in June as it turned to its old playbook of boosting economic growth through public infrastructure investment amid fears of an economic slowdown.
China and over 20 other emerging markets are undergoing their worst wave of capital exodus in around seven years, with a net total of US$4 billion withdrawn from equities and bonds combined in June, according to the Institute of International Finance.
China’s audit office says local governments have misused proceeds from special purpose bonds and falsified information to receive coronavirus subsidies, as regional finances are squeezed by growing economic pressure.
Foreign investors sold 110 billion yuan (US$16.37 billion) net of China’s government debt last month, amid growing monetary divergence between its central bank and the US Federal Reserve that could further weaken the yuan.