The proposal under discussion by senior policymakers would involve the sale of ultra-long sovereign bonds to fund projects related to food, energy, supply chains and urbanization, people familiar with the matter said.
Prior sales of such bonds are rare: In the aftermath of the Asian Financial Crisis in 1998, for example, the government issued special debt to replenish capital for major state-owned banks. The most recent sale was in 2020, when authorities issued 1 trillion yuan worth of those bonds to pay for pandemic response measures.
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. Stubborn 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 people familiar said. The Ministry of Finance did not respond to a request for comment. China last year 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% of GDP – an action that involved issuing additional sovereign debt worth 1 trillion yuan to support disaster relief and construction. Bloomberg
