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China is considering raising an additional 6 trillion yuan ($850 billion) from special treasury bonds over three years to boost its struggling economy through increased fiscal stimulus, as reported by Caixin Global. Finance Minister Lan Foan’s statement about significantly increasing debt to stimulate the economy has raised hopes for a much-needed economic recovery. The country’s plans to issue special sovereign bonds worth about 2 trillion yuan this year as part of fresh fiscal stimulus have also been previously reported by Reuters.
Recent data, including trade and new lending figures for September, falling below expectations has raised concerns about China meeting its growth target this year. To counter deflationary pressures, authorities have already implemented monetary stimulus and support measures for the property sector. The Politburo, a meeting of top Communist Party leaders, has also pledged necessary spending to boost growth back on track.
Speculation regarding the size of the expected fiscal package has been intense, with Chinese shares experiencing fluctuations in anticipation of official details. While the rumored 6 trillion yuan in extra debt over the next three years may not be the bazooka some investors were hoping for, it could help stabilize growth and increase the likelihood of achieving a growth rate of about 5% in 2024 and 2025, according to analysts.
The funds from the special treasury bonds are expected to help local governments address off-the-books debts and could potentially provide subsidies to low-income households, support the property market, and replenish state banks’ capital. Premier Li Qiang announced earlier this year that ultra-long-term special treasury bonds would be issued for several consecutive years to fund major national strategic projects.
China’s current plans involve issuing 1 trillion yuan in such bonds this year, but it is widely anticipated that this figure will be increased at a upcoming meeting of the Standing Committee of the National People’s Congress. The country’s ongoing efforts to stimulate the economy and support key sectors reflect its commitment to sustaining growth in the face of economic challenges.
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Emma Collins, graduated in Financial Economics from the University of Chicago in the USA in 2016. She has since worked at an asset management firm in New York, where she specializes in investment strategies and portfolio management. Emma has a keen interest in financial analysis and has published several articles in renowned financial journals. Her work focuses on providing actionable insights to investors, and she is known for her forward-thinking approach to managing financial portfolios.
