The expansion rate of municipal investment bond issuance has plummeted in a cliff-like drop; the average annual growth rate fell sharply from 13% in 2021–2023 to just 4% in 2024–2025. The traditional investment-driven growth model is basically over.
Behind this is the strong regulatory control over local government debt risk. The direct results of debt-reduction measures—local governments cutting infrastructure spending and raising the investment return threshold for projects—have brought about this slowdown.
What’s interesting is that financing costs are actually steadily declining, dropping from over 6% in 2021 to about 5% in 2025. This reflects a combination of a loose monetary environment and financial institutions, under the debt-reduction framework, carrying out interest-rate cut and refinancing actions on the rollover of existing debt.
This is a typical “bundle of punches” combining stock debt-to-debt conversion with incremental control. The issuance expansion hits the brakes, but the cost of servicing existing debt is reduced to avoid a hard landing. In the short term, it looks like a rational contraction; in the long term, it represents a structural shift in local governments’ investment model.
The days when GDP was boosted by borrowing for infrastructure really are over.
Behind this is the strong regulatory control over local government debt risk. The direct results of debt-reduction measures—local governments cutting infrastructure spending and raising the investment return threshold for projects—have brought about this slowdown.
What’s interesting is that financing costs are actually steadily declining, dropping from over 6% in 2021 to about 5% in 2025. This reflects a combination of a loose monetary environment and financial institutions, under the debt-reduction framework, carrying out interest-rate cut and refinancing actions on the rollover of existing debt.
This is a typical “bundle of punches” combining stock debt-to-debt conversion with incremental control. The issuance expansion hits the brakes, but the cost of servicing existing debt is reduced to avoid a hard landing. In the short term, it looks like a rational contraction; in the long term, it represents a structural shift in local governments’ investment model.
The days when GDP was boosted by borrowing for infrastructure really are over.