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China plans $139 billion special ultra-long debt for economy

People practice tai chi in front of buildings in Pudong's Lujiazui Financial District in Shanghai, China, on Monday, Feb. 19, 2024.
People practice tai chi in front of buildings in Pudong's Lujiazui Financial District in Shanghai, China, on Monday, Feb. 19, 2024. (Bloomberg)

By Bloomberg News

(Bloomberg) — China plans to issue 1 trillion yuan ($139 billion) of ultra-long special central government bonds this year as authorities ramp up fiscal stimulus for the world’s second-largest economy.

Premier Li Qiang outlined the proposal on Tuesday in a government work report delivered at the National People’s Congress, an annual gathering of China’s top legislative body in Beijing. It’s only the fourth such sale in the past 26 years, with the most recent one in 2020 when authorities issued 1 trillion yuan worth of those bonds to pay for pandemic response measures.

China aims to issue such ultra long-term special bonds for several consecutive years, though Li’s report did not include a target beyond 2024.


The issuance this year — which Bloomberg News reported in January was under consideration — signals a focus by President Xi Jinping’s government this year on tapping fiscal support to help the economy, which is facing pressures from deflation, the property crisis and dampened consumer confidence. The issuance of special sovereign bonds shows an effort to centralize spending at a time when local officials are struggling under a mountain of debt.

“It’s a very necessary move, logically speaking. Local governments clearly lack the fiscal resources looking at the overall fiscal financing picture,” said Yao Wei, chief economist for Asia Pacific at Societe Generale SA. “The future trend should be the nation borrowing with the central government’s credibility.”

Source: Bloomberg-compiled data

Chinese stocks fell early Tuesday after key targets — including an economic growth goal of around 5% for 2024 — were announced at the National People’s Congress. The Hang Seng China Enterprises Index slumped as much as 2.1%, the biggest decline in nearly one week, while the onshore CSI 300 Index swung between gains and losses.

The yuan was little changed both onshore and offshore on Tuesday morning. The yield on China’s 30-year government bonds was little changed at 2.47%. It’s been hovering around a two-decade low as investors bet on more easing by Beijing.

Alongside the special central debt, local governments will be allowed to sell 3.9 trillion yuan ($542 billion) of new special bonds, mainly used to finance infrastructure spending, according to the report.

Beijing also set its fiscal deficit target at 3% of gross domestic product. That’s the same as last year’s goal, which was bumped up to 3.8% in October alongside an announcement for extra debt issuance. Special bond issuance usually does not count within the official deficit ratio.

The issuance of the special sovereign debt is “much needed when local governments are increasingly fiscal constrained given the structural shortfalls in land sales,” said Xiaojia Zhi, head of research at Credit Agricole CIB.

In addition to the fiscal support, some economists pointed to the ongoing need for looser monetary policy as well if the government hopes to reach its economic growth goal this year. The target mirrors last year’s, but will be harder to achieve given a less favorable base of comparison.

“What is certain is that interest rates will go lower to mitigate the burden of more government bond issuance and stimulate demand,” said Gary Ng, senior economist at Natixis SA. “This means that it offers some catalysts for bonds, but the impact on equities and currency will depend on the stimulus’ effectiveness and real economic improvement.”

—With assistance from Krystal Chia, Emma Dong, Shulun Huang, Iris Ouyang, Zhu Lin and Yujing Liu.

©2024 Bloomberg L.P.