* China allows more local bond issuance to boost economy
* Jan-July net local issuance at 1.69 trln yuan
* Annual quota likely to be met by end-Sept
* Local govts may be allowed to issue more bonds spur investment (Adds analyst comment, details)
BEIJING, Aug 22 (Reuters) - China’s local governments issued a net 1.69 trillion yuan ($238.5 billion) in special bonds in the first seven months of the year, the finance ministry said on Thursday, accounting for 78.4% of the annual quota.
Beijing is trying to spur more regional infrastructure investment to support the economy as the U.S.-China trade war drags on, weighing on its vast manufacturing sector and hurting business confidence.
But construction activity so far has been more modest than expected, raising expectations policymakers will need to roll out additional growth boosting measures.
The central government has announced a quota of 2.15 trillion yuan for local governments to sell special bonds this year to fund road, rail and water projects and other civic works.
In July alone, net issuance of such bonds totaled 299.7 billion yuan, the ministry said in a statement on its website.
China has accelerated bond issuance in recent months in order to fill the full-year quota by the end of September.
Policy insiders have said local governments may be allowed to sell more bonds in the fourth quarter, but this could only be considered if the economy continues to falter and more funds are needed to keep projects going once the quota is used up.
“We should appropriately increase the size of special bond issuance to help boost infrastructure investment and stabilise economic growth,” Wen Bin, chief economist at Minsheng Bank in Beijing.
Infrastructure investment rose 3.8% in the first seven months from a year earlier, slowing from 4.1% in the first half despite massive local bond issuance.
Weighed down by weak demand at home and abroad, China’s economic growth slowed to a near 30-year low of 6.2% in the second quarter, and activity stumbled more sharply than expected in July, with industrial output growth cooling to a more than 17-year low. ($1 = 7.0862 Chinese yuan renminbi) (Reporting by Beijing Monitoring Desk, Stella Qiu and Kevin Yao; Editing by Simon Cameron-Moore & Kim Coghill)