Chinese authorities agreed to issue 3 trillion yuan ($411 billion) worth of special treasury bonds next year, according to Reuters.
The plan to issue sovereign bonds in 2025 would represent a sharp increase from this year’s 1 trillion yuan. Following the news, yields on China’s 10-year and 30-year Treasuries rose 1 basis point (bp) and 2 bp, respectively.
The planned issuance will be the largest ever and underscores Beijing’s willingness to go even deeper into debt to counter deflationary forces. Under next year’s plan, about 1.3 trillion yuan to be raised through long-term special treasury bonds would be used to finance “two major” and “two new” programmes, sources said. State planner NDRC stated on 13 December that Beijing had fully allocated all the proceeds from this year’s 1 trillion yuan in extra-long special treasury bonds.
The remaining proceeds will be used to recapitalise large state-owned banks as leading lenders struggle with shrinking margins, volatile profits and rising bad loans. Next year’s issuance of new special treasury debt will equal 2.4 per cent of the country’s gross domestic product (GDP) in 2023. In 2007, Beijing raised 1.55 trillion yuan through such bonds, or 5.7 per cent of the country’s economic output at the time.
China plans to widen its budget deficit to a record 4 per cent of GDP next year and maintain its economic growth target of around 5 per cent, according to Reuters. China’s economy has struggled this year due to a severe property crisis, high local government debt and weak consumer demand. Exports could also face US tariffs of 60 per cent if Trump keeps his campaign promises.
While risks to exports mean China will have to rely on domestic sources of growth, consumers feel less wealthy due to falling property prices and minimal social security. Chinese officials said last week that Beijing planned to expand exchange programmes for consumer goods and industrial equipment to include more products and sectors.
