China plans to issue special sovereign bonds worth 2 trillion yuan ($284 billion) this year as part of a new fiscal stimulus package, according to sources familiar with the matter.
This initiative adds to ongoing efforts by the government to combat deflationary pressures and stimulate economic growth amid a faltering post-COVID recovery.
Of the planned bond issuance, 1 trillion yuan will be allocated primarily to boost domestic consumption. Proceeds from these special bonds will fund various initiatives, including subsidies for the trade-in and renewal of consumer goods and upgrades to large-scale business equipment. Additionally, the funds will support social programs, such as a monthly allowance of 800 yuan ($114) for families with two or more children, excluding the first child, aimed at addressing demographic concerns.
A second 1 trillion yuan bond issuance will be used to help local governments tackle mounting debt, which has become a significant challenge. Local governments in China are currently burdened with around $13 trillion in debt, and this new fiscal support is intended to ease that pressure.
China’s fiscal stimulus traditionally focuses on investment, but as returns on this spending dwindle, efforts are now shifting towards boosting household consumption, which accounts for less than 40% of the country’s GDP—well below the global average.
Chinese leaders recently reaffirmed their commitment to achieving the country’s 2024 economic growth target of around 5%, with renewed efforts to stabilize the housing market. These fiscal measures follow broader monetary policies introduced by the central bank, which included liquidity injections and lower borrowing costs aimed at restoring confidence in the economy.
Further details on these fiscal support measures could be announced as early as this week, sources say, as the government works to complement recent monetary stimulus efforts with a robust fiscal package.
With input from Reuters.
