China to issue $284 billion of sovereign debt this year

DELHI Delhi. China plans to issue special sovereign bonds worth about 2 trillion yuan ($284.43 billion) this year as part of a new fiscal stimulus, two sources with knowledge of the matter said. The move is among steps taken to tackle strong deflationary pressures and faltering economic growth. As part of the package, the Ministry of Finance (MOF) plans to issue special sovereign debt of about 1 trillion yuan mainly to boost consumption amid growing concerns that the post-Covid economic recovery is being hampered, the sources said.

Part of the MOF proceeds raised through the special bonds, which are issued for a specific purpose, will be used to increase subsidies for trade and renovation of consumer goods and upgrades of large-scale business equipment, two sources said. The proceeds will also be used to provide a monthly allowance of about 800 yuan, or $114, per child to all families with two or more children, except for the first child, the first source said. China aims to raise another 1 trillion yuan through a separate special sovereign debt issuance and plans to use the proceeds to help local governments deal with their debt problems, the source said.

Also Read – Petrol and diesel will become cheaper

Most of China’s fiscal stimulus still goes to investment, but returns are diminishing and the spending has put local governments in debt by $13 trillion. China’s domestic spending is less than 40% of GDP, about 20 percentage points below the global average. Some of the fiscal support measures could be unveiled as soon as this week, said the sources, who declined to be named because they were not authorized to speak to the media.

China’s State Council Information Office, which handles media queries on behalf of the government, and the Ministry of Finance did not immediately respond to requests for comment.Chinese leaders on Thursday vowed to reach the 2024 economic growth target of about 5% and halt a housing market collapse, state media reported, citing a politburo meeting.
The politburo said the country will make good use of its ultra-long special sovereign bonds and local government special bonds to support government investment and guarantee needed fiscal spending.The planned fiscal expansion is the latest effort by Chinese policymakers to revive an economy grappling with deflationary pressures and at risk of missing this year’s growth target due to a sharp drop in property prices and weak consumer confidence.
It will also come after the central bank on Tuesday announced more extensive-than-expected monetary stimulus and property market support measures to restore confidence in the economy, with key measures including liquidity injections and lower borrowing costs.