China weighs more stimulus, considers $139 billion of debt issuance under special bonds
Also Read: China may be losing its sway over Taiwanese business The deliberations underscore efforts by President Xi Jinping’s government to shift spending responsibility from debt-laden local officials to central authorities in support of an economy that is struggling to maintain momentum. Rigid deflationary pressures, the ongoing property crisis and weak domestic demand are all weighing on activity and suppressing confidence, prompting calls among economists and investors for further stimulus.
The discussions are ongoing and the plan could be changed, the report added. Last year, China also tapped into extra government bond sales to help the economy.
In that case, Beijing took the unusual step of raising 2023’s fiscal deficit ratio to about 3.8 per cent of gross domestic product — an action that involved issuing additional sovereign debt worth 1 trillion yuan to support disaster relief and construction. Unlike last year, the 2024 proposal would use special debt, which in the past has been counted in addition to the normal budget and has not contributed to the headline deficit ratio, according to the report.
The ultra-long bond design means proceeds will be repaid over several decades, lowering the pressure to make payments in the short term. This in contrast to the debt issued late last year, which included key tenor bonds to be paid back over a much smaller period of time of a few years to a decade.
Ultra-long bonds still may not be able to address all the fiscal challenges, economists at Goldman Sachs Group wrote in a research note that called the issuance of such debt a likely toolkit for fiscal easing this year. Local governments in China are working on project pitches and the sales would be planned for the second
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