China’s first batch of 1 trillion yuan in special-purpose treasury bonds to be issued, underscores policymakers’ resolve to support economy
Published: May 13, 2024 01:22 PM
Chinese yuan Photo:VCG

Chinese yuan Photo:VCG

China plans to issue the first batch of 1 trillion yuan ($140 billion) in ultra-long-term treasury bonds starting from Friday, as the authorities seek funds to shore up government spending and crucial projects' investment for high-quality economic development.

The timing of the treasury bonds in 2024 will go from May through November. The bonds will include 20-, 30- and 50-year securities, according to a statement on the website of the Ministry of Finance (MOF) on Monday.

As the debut of ultra-long special- purpose treasury bonds for the year, the issuance of 40 billion yuan of 30-year bonds will start on Friday, according to the MOF.
Chinese Premier Li Qiang on Monday stressed the significance in issuing ultra-long-term special-purpose government bonds to effectively support major strategies and the development of security capabilities in key areas.

The issuance comes earlier than expected, underscoring the central government's resolve to support the economy, analysts said, noting that the move will help stabilize market expectations and elevate market confidence.

The pace of the bond issuance is faster than expected, while the time span is longer than expected too. It is rare in China's history to issue ultra-long-term government bonds of 30 years or longer, Xi Junyang, a professor at the Shanghai University of Finance and Economics, told the Global Times on Monday.

Xi said the move shows that the authorities are appropriately strengthening a proactive fiscal policy to improve its effectiveness, which will play an important role in stabilizing expectations, sparking domestic demand and bolstering the economy.

Since the bonds are ultra-long-term, the central government will only need to pay interests over a relatively long period, while the time to repay the principal will be greatly delayed, which will help improve the country's fiscal sustainability, according to Xi.

In order to ensure a smooth issuance, the Department of Treasury of the MOF scheduled a mobilization meeting on Monday morning, according to media reports.

The Communist Party of China Central Committee's Political Bureau held a meeting on April 30, which stressed that the country should ramp up efforts to effectively implement macroeconomic policies, while optimizing a proactive fiscal policy and a prudent monetary policy, the Xinhua News Agency reported earlier. 

The bonds will be issued at an early stage and put to good use, and the issuance and utilization of the proceeds will be expedited, according to the tone-setting meeting.
The bonds are being issued by the central government and will help improve the government's debt structure, Cao Heping, an economist at Peking University, told the Global Times on Monday.

Compared with bonds issued by local governments, these special-purpose treasury bonds span decades, with lower costs. As a result, the process will prevent risks caused by excessive local government debt, and expand room for fiscal policy maneuvers for local governments, Cao said.

During this year's two sessions in March, policymakers said that China plans to issue ultra-long special-purpose treasury bonds in 2024 and in each of the next several years. This year, 1 trillion yuan of such bonds will be issued.

The plan to issue the bonds starting from 2024 is a strategic decision that serves the goal of building China into a great country and rejuvenating the Chinese nation, Zheng Shanjie, head of the National Development and Reform Commission, told a press conference during the two sessions in March.

The funds raised through these bond sales will support scientific and technological innovation, integrated urban-rural development, coordinated regional development, food and energy security, and the high-quality development of the population, Zheng said.

China's GDP grew by 5.3 percent in the first quarter, laying a solid foundation for the economy to achieve the full-year target of about 5 percent.

As stepped-up fiscal and financial policies, and other macro-policies like equipment renewals and consumer goods trade-ins continue to produce effects, investment will be boosted and economic flows will be facilitated for stable economic growth, Wen Bin, chief economist from China Minsheng Bank, told the Global Times.

Wen said the accelerated issuance of the special-purpose treasury bonds and local government bonds will provide effective support for growth. 

Meanwhile, there is still room for interest rate and reserve requirement ratio cuts for the rest of the year.