China establishes working mechanism to issue 1 trillion yuan in government bonds, aiming to boost economic growth in Q4
Positive macro policy will boost economic growth in Q4: experts
Published: Nov 17, 2023 08:24 PM
Ministry of Finance Photo: VCG

Ministry of Finance Photo: VCG

China stepped up its fiscal and monetary policy efforts on Friday to address the financing needs of local governments and the funding demands of property developers.

The effect of the positive macro policy has been reflected in the economic data for October and is expected to have a strong impact on economic growth in the fourth quarter, helping China achieve its growth target for this year, experts said.

The National Development and Reform Commission, the Ministry of Finance (MOF) and related government agencies have established a working mecha-nism to ensure the smooth and steady issuance of 1 trillion yuan ($139.3 bil-lion) in additional government bonds, the MOF said on Friday.

The ministry detailed the latest work on the additional government bond issu-ance, China Central Television (CCTV) reported. The MOF said that they will closely review projects and allocate an appropriate budget, and strengthen regulation of capital raised through government bonds to enhance capital us-age efficiency, according to the report.

On October 24, the Chinese central government announced a planned issuance of one trillion yuan in additional government bonds in the fourth quarter to support the rebuilding of disaster-hit areas and boost the country's disaster relief capabilities.

The bonds will be transferred to local governments. A total of 500 billion yuan will be used this year, and another 500 billion yuan will be carried over to next year.

In order to bolster high-quality economic and social development, a total of 3.52 trillion yuan in special government bonds were issued in the first 10 months of this year, which were mainly used for key sectors including industrial parks, transport infrastructure and affordable housing projects, domestic media outlet the Securities Times reported on Friday, citing the MOF.

The effects of the policy are already evident in the economic data for October, with significant rebound in consumption, Tian Yun, a veteran economist based in Beijing, told the Global Times on Friday.

The deployment by the MOF will further help alleviate the payment pressure on local governments, resolve the issue of local debt and boost economic growth in the last two months of the year, Tian said.

"It is believed that the economic growth rate in the fourth quarter will increase to around 5.5 percent or even higher," Tian said.

The total amount of special government bonds so far this year saw a notable increase compared with corresponding periods in the last several years, un-derscoring the strength and effectiveness of fiscal policies in bolstering stable economic recovery, Xi Junyang, a professor at the Shanghai University of Fi-nance and Economics, told the Global Times on Friday.

Xi said the stepped-up fiscal policies will produce notable effects on the macro-economy in the fourth quarter, as the country's GDP growth rate in the last three months will be relatively high compared with the previous three quar-ters. "There is full confidence that the preset annual GDP target of around 5 percent can be achieved," he said.

In the next stage, the MOF said that more efforts will be made to play the driv-ing role of special government bonds and boost sustained recovery of the economy, according to the report.

In line with the deployment of the State Council, the ministry will allocate some of the new local government bond quota of 2024 in advance to appropriately guarantee their financing needs. Meanwhile, authorities will strengthen management of government bonds, especially special government bonds, to ensure capital for key projects, drive effective private investment and enhance capital usage efficiency.

The move will alleviate the fiscal pressure of local governments and expand the role of local finance in boosting the development of local economies and ensuring the sound recovery of the Chinese economy, Xi said.

In another move, China will meet all reasonable financing demands of property developers regardless of their types, and will not refrain from issuing loans and will not cut loans to property companies that are operating normally, said a financial institution meeting jointly hosted by China's central bank, National Administration of Financial Regulation and the securities regulator on Friday.

The authorities emphasized the need to maintain confidence and create a fa-vorable monetary environment. Efforts will be made to carefully plan credit allocation for the remaining two months of this year and the beginning of next year to maintain a steady increase in credit and promote stable economic growth.

Tian noted that the key focus for economic growth in the remaining months of the year is on investment, particularly whether real estate investment can sta-bilize and whether new construction projects can actively enter the actual construction phase before the end of the year. 

He anticipated that further interest rate cuts and reserve requirement ratio reductions are still an option in the tool box to pump liquidity into the market.