China’s slower issuance of special government bonds — a key source of capital for infrastructure projects — will likely pick up in August-September, but improved funding prospects are expected to provide only modest support to the construction and steel demand, said sources Aug. 5.

Chinese long steel producers recently bumped up production cuts amid widening losses, which prevented a sharp fall in local steel prices prevalent since early July. But any recovery in steel prices will likely be modest, given the bleak outlook for construction steel demand, market participants reckoned.

The issuance of new local government special bonds likely reached Yuan 1.775 trillion over January-July, accounting for about 45.5% of the new special bond issuance quota for 2024, according to latest media reports.

As a result, new special bonds issuance over the first seven months of 2024 was nearly 29% lower from a year ago, and 49% lower from the corresponding period in 2022, latest data from the Ministry of Finance showed.

In tandem with slower fiscal support, the year-on-year growth rate of China’s infrastructure investment slowed to 5.4% in the first half of 2024, down from 5.9% in 2023 and 9.4% in 2022, data from the National Bureau of Statistics showed.