A Study on the Risk of Special-Purpose Bonds from the Perspective of Mixed Public Bonds
Preventing and resolving local debt risks is currently a focus of fiscal and financial work.The Third Plenary Session of the 20th Central Committee of the Communist Party of China proposed improvements to government debt manage-ment system,the establishment of a comprehensive local debt monitoring and supervision system,and the creation of a long-term mechanism to prevent and resolve hidden debt risks.This study explores the inherent mechanisms of special-purpose bond risk from the perspective of mixed public bonds.Employing microdata at the project level for special-purpose bonds from 2019 to 2022,and integrating important policy documents such as the Thirteenth Five-Year Plan and the Fourteenth Five-Year Plan,the research provides a comprehensive analysis of the mixed usage,complex credit rela-tionship,and blended risks associated with special-purpose bonds.It also empirically examines the causal relationship be-tween these factors.The findings are as follows.Firstly,the mixed usage of special-purpose bonds leads to a blending of the credit of central and local governments(blended credit).An increase in the proportion of projects supported by special-purpose bonds that align with major national strategies significantly reduces the credit spreads of the secondary market of special-purpose bonds,distorting the market pricing mechanism.This effect is particularly prominent for special-purpose bonds with larger underwriting syndicates and a higher proportion of non-bank underwriters.Scondly,the mixed usage of special-purpose bonds results in the entwining of special-purpose bond risk with the debt risk of local government financing vehicle(blended risk).An increase in the proportion of projects supported by special-purpose bonds that align with major national strategies significantly expands the issuance scale of municipal bonds by local government financing vehicle,thereby exacerbating the complexity and difficulty of addressing local debt risks.This effect is more pronounced in regions with larger fiscal revenue-expenditure gaps,promotion or development pressures.These findings provide new insights into the inherent mechanisms of risk generation in local debt such as special-purpose bonds,thereby optimizing local debt governance.Addition-ally,they highlight the critical significance of ultra-long special treasury bonds in preventing and resolving local debt risks.
Special-Purpose BondsMixed Public BondsMajor National StrategiesCredit SpreadMunicipal Bonds
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