According to a Reuters report citing sources familiar with the matter, Chinese authorities are poised to issue an unprecedented 3 trillion yuan ($411 billion) in special treasury bonds next year, marking a significant fiscal stimulus effort as Beijing aims to invigorate a sputtering economy.
This mammoth issuance would far surpass this year’s 1 trillion yuan and represents the largest such debt undertaking on record. The move comes as China braces for potential economic headwinds from anticipated increases in U.S. tariffs with Donald Trump’s expected return to the presidency.
The proceeds from these bonds will target several key areas to boost the economy, including enhancing consumption through subsidy programs, driving equipment upgrades in businesses, and investing in sectors aligned with innovation and advanced capabilities.
After the announcement, yields on China’s 10-year and 30-year treasuries saw a slight uptick, rising 1 and 2 basis points respectively.
The significant portion of the funds, approximately 1.3 trillion yuan, will support “two major” and “two new” programmes, in which the “new” initiatives include a subsidy scheme allowing consumers to trade in old vehicles or appliances for new ones at a discount, and a separate program to subsidize business equipment upgrades.
Meanwhile, the “major” initiatives involve strategic national projects such as infrastructure construction including railways and airports.
Much of next year’s funding will also be directed towards “new productive forces,” which refers to advanced manufacturing sectors like electric vehicles, robotics, semiconductors, and green energy.
Additionally, some bonds will help recapitalize China’s large state banks, addressing challenges of decreasing margins, declining profits, and rising non-performing loans.
The 3 trillion yuan planned issuance equates to about 2.4% of China’s 2023 GDP. This follows a historical precedent in 2007 when China raised 1.55 trillion yuan, representing 5.7% of its GDP then.
