In a bold fiscal move, China has revealed plans to issue 1 trillion yuan ($139 billion) of ultra-long special central government bonds this year. Premier Li Qiang announced this initiative during the National People’s Congress, emphasizing the commitment to bolster the economy through fiscal stimulus. This marks the fourth such sale in the last 26 years and demonstrates President Xi Jinping’s government’s focus on centralizing spending amid economic challenges.
The issuance of these ultra-long-term special bonds is part of a broader effort to address deflation, a property crisis, and subdued consumer confidence in the Chinese economy. Premier Li Qiang stated that China aims to continue issuing such bonds for several consecutive years, although specific targets beyond 2024 were not included in the government work report.
This move underscores a shift toward centralizing spending at a time when local officials grapple with significant debt burdens. The funds raised from the issuance will be directed towards financing major national strategies and enhancing security capacity in key areas, according to the Ministry of Finance’s budget report.
Alongside the central government’s special debt, local governments will be permitted to sell 3.9 trillion yuan ($542 billion) of new special bonds. The overall fiscal deficit target was set at 3% of gross domestic product, maintaining the goal from the previous year. The special bond issuance by both local and central authorities does not count within the official deficit ratio.
Economists view this move as crucial given the fiscal constraints faced by local governments, particularly with structural shortfalls in land sales. The issuance of special sovereign bonds is deemed necessary to address these challenges and contribute to fiscal sustainability.
Despite fiscal measures, economists stress the ongoing need for looser monetary policy to achieve the economic growth goal set for the year. The central government plans to issue 3.34 trillion yuan ($464 billion) in general sovereign bonds in 2024, reflecting a strategic approach to balance fiscal and monetary policies for sustained economic improvement.