Local governments are expected to continue tapping into the remaining debt quota, with experts estimating around 500 billion yuan. To stabilize the economy, the direction of the fiscal incremental policies to be rolled out this year is now clear: on top of the 5.2 trillion yuan of new local government bonds set at the beginning of the year, additional local government bonds may be issued.

The State Council executive meeting held on September 28 made clear that, in response to problems emerging in current economic operations, the intensity of counter-cyclical macro policy adjustment must be increased to push the economy toward sustained, new, improved and positive development and to strive to complete this year's economic and social development targets. When deploying a batch of pragmatic and effective incremental policies, the meeting required "making good use of the remaining local government debt quota."

Wen Laicheng, a professor at the Central University of Finance and Economics, told Yicai that this wording means that before the end of this year, local governments will issue additional local government bonds within the local debt ceiling approved by the National People's Congress, thereby filling the gap in local fiscal capacity and driving economic growth. The remaining local government debt quota refers to the difference between the statutory local government debt ceiling and the outstanding balance. To control local government debt risks, the central government applies a ceiling management system to local debt, meaning the local debt balance must not exceed the ceiling. In practice, local governments have kept the current local debt balance below the ceiling by strengthening fiscal revenue and expenditure management and arranging budget funds to repay maturing statutory debt.

Data from the Ministry of Finance show that as of the end of 2025, the national local government debt balance was 54.8231 trillion yuan, while the ceiling for that year was 57.9874 trillion yuan. This means that at the end of 2025, the remaining local government debt quota was 3.1643 trillion yuan. According to previous official arrangements, of that roughly 3.2 trillion yuan in remaining local debt quota, 2 trillion yuan was explicitly designated for issuance this year to replace existing hidden debt, so the remaining local debt quota actually available this year is smaller, possibly around 1 trillion yuan.

Wen Laicheng said that, based on recent economic data, fixed asset investment is showing a downward trend and the real estate market continues to adjust, which has had a certain impact on local fiscal capacity. At the same time, this year's quota for local government special bonds is flat with last year, leaving some room. Under the current economic situation, issuing an additional portion of local government bonds is conducive to consolidating the momentum of economic recovery and improvement and strongly supporting localities in completing this year's economic and social development targets.

Ministry of Finance data show that in the first eight months of this year, local general public budget revenue at the same level was 8.6515 trillion yuan, up 3.1% year on year. However, affected by the continued decline in land sale revenue, local government fund budget revenue at the same level was 1.8127 trillion yuan, down 22.9% year on year. This has also affected the intensity of local fiscal expenditure to a certain extent. In the first eight months of this year, local government fund budget expenditure was 4.8773 trillion yuan, down 11.3% year on year.

In fact, when the economy faces pressure and fiscal policy needs to step up, while local fiscal capacity falls short of expectations at the start of the year, using the remaining local debt quota to increase the issuance quota of local government bonds has been one of the commonly used fiscal incremental measures in recent years. For example, in the fourth quarter of 2022, the State Council used 500 billion yuan of remaining local debt quota, mainly for project investment and construction. In the fourth quarter of 2024, 400 billion yuan of remaining local debt quota was used, mainly to supplement comprehensive fiscal capacity and support the "three guarantees" (guaranteeing basic livelihoods, wages and operations). In the fourth quarter of 2025, 500 billion yuan of remaining local debt quota was used to supplement local governments' comprehensive fiscal capacity for debt resolution and to promote major project construction to expand effective investment.

The amount and direction of the remaining local debt quota to be used in the fourth quarter of this year still await subsequent official announcement. Wen Laicheng said that, referring to the scale of previous uses of the remaining local debt quota, the amount used this year may be around 500 billion yuan and will not exceed 1 trillion yuan. According to the officially disclosed use of the 500 billion yuan remaining local debt quota last year, 300 billion yuan was used to supplement local governments' comprehensive fiscal capacity to support localities in resolving the debt of existing government investment projects and clearing government arrears owed to enterprises; 200 billion yuan was used to support eligible project construction in major economically developed provinces, so as to precisely support the expansion of effective investment and better leverage the role of major economically developed provinces in underpinning the economy.

Judging from the pace of issuance and use of the remaining local debt quota last year, localities began receiving quota allocations from the Ministry of Finance successively in October last year. Generally speaking, places with more developed economies, stronger fiscal strength, greater debt space and more major projects received larger quotas. In November, remaining local debt quotas were issued intensively. The above-mentioned State Council executive meeting required that efforts to implement various policies be stepped up and intensified, that the implementation efficiency of existing policies be further enhanced, that the issuance and use of various types of bonds be accelerated, that major engineering projects specified in the 15th Five-Year Plan and the implementation plans for the "six networks" and other plans start construction as early as possible, that the renovation and upgrading of old reservoirs and old grain depots be advanced, and that interest subsidy policies for expanding investment and promoting consumption be implemented with greater force.

Data from Qichacha show that as of September 29, about 8.8 trillion yuan of local government bonds had been issued nationwide. Among them, about 4.2 trillion yuan of new bonds had been issued, accounting for about 80% of the full-year new local debt quota set at the beginning of the year (5.2 trillion yuan), with 1 trillion yuan of new local bonds still awaiting issuance.