China plans to issue $139 billion in ultralong special central government bonds in 2024 to stimulate the economy and achieve its growth target. The move reflects a shift towards fiscal support over monetary policy as part of a long-term Centralized S...
China is set to issue the equivalent of $139 billion in special ultralong bonds this year as part of a strategy to revitalize business activity and achieve its economic growth target of approximately 5% for 2024.
Chinese Premier Li Qiang revealed in a government work report that Beijing will release CNY1 trillion of "ultralong special central government bonds" in 2024 and potentially extend this practice for the following years to come.
The bond proceeds from this issuance will support mega projects and strategic sectors that contribute to national development objectives and enhance national security. However, specific details regarding the utilization of these funds were not disclosed in the report.
China's previous significant issuance of ultralong bonds was in 2020, when it secured CNY620 billion to finance pandemic relief efforts.
Analysts have highlighted that the planned issuance shows Beijing's emphasis on fiscal support rather than monetary policy to revitalize an underperforming economy. This decision follows the central bank's reduction of the reserve-requirement ratio for banks earlier this year.
In the previous year, local governments issued nearly CNY4 trillion in special bonds. These funds were allocated towards various projects such as public housing, 5G infrastructure, and the renovation of underdeveloped urban areas.
Bruce Pang, JLL's chief economist and head of research for Greater China, stated: "Policymakers are implementing a tool with a long-term and centralized approach, rather than a drastic stimulus package."
Analysts believe that the central government bond could alleviate debt pressures on local governments. As it will not be part of the general public budget, this bond will offer Beijing greater flexibility in adjusting its fiscal-deficit goal throughout the year.
Premier Li announced that China aims to maintain a fiscal deficit of 3% relative to GDP by 2024, matching the initial target set a year prior. This strategic move showcases China's commitment to sustainable economic development.
"Today's fiscal target doesn't seem to be too exciting, but implementation will be the key," emphasized Larry Hu, chief China economist at Macquarie.
For more insights on fiscal targets, contact Larry Hu at Macquarie.
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