China also plans to raise another 1 trillion yuan through a separate special sovereign debt issuance. (Photo: glaborde7/ Pixabay)
A China plans to issue special sovereign bonds worth about 2 trillion yuan ($284.43 billion) this year as part of a new fiscal stimulus, two sources with knowledge of the matter said, expanding a raft of measures to combat strong deflationary pressures and help economic growth.
As part of the package, the Ministry of Finance plans to issue 1 trillion yuan of special sovereign debt, mainly to stimulate consumption amid growing concerns about the conditions of the post-Covid economic recovery, the sources said.
Part of the ministry's funds raised through special bonds, which are issued for a specific purpose, will be used to increase subsidies for the exchange and renewal of consumer goods and for the upgrade of large-scale commercial equipment, the two sources said.
The funds will also be used to provide a monthly benefit of about 800 yuan, or $114, per child to all families with two or more children, excluding the first child, the first source said.
China also plans to raise another 1 trillion yuan through a separate special sovereign debt issuance and plans to use the proceeds to help local governments resolve their debt problems, the source added.
Most of China’s fiscal stimulus still goes to investment, but returns are dwindling and the spending has saddled local governments with $13 trillion in debt. China’s domestic spending is less than 40% of GDP, about 20 percentage points below the global average.
Some of the fiscal support measures could be unveiled as early as this week, said the sources, who declined to be identified as they were not authorized to speak to the media.
China's State Council Information Office, which handles media inquiries on behalf of the government, and the Ministry of Finance did not immediately respond to requests for comment.
Chinese leaders promised on Thursday (26) to press ahead with achieving their 2024 economic growth target of approximately 5% and halting the decline in real estate marketstate media reported, citing a Politburo meeting.
The Politburo said the country will make good use of its ultra-long sovereign special bonds and local government special bonds to support government investment and necessary fiscal spending should be guaranteed.
The planned fiscal expansion is the latest attempt by Chinese authorities to revive an economy struggling with deflationary pressures and at risk of missing this year's growth target due to a sharp downturn in the property sector and weak consumer confidence.
The central bank announced on Tuesday (24) broader-than-expected monetary stimulus and real estate market support measures to restore confidence in the economy, with important measures including liquidity injections and lower borrowing costs.
The measures helped market sentiment, but mainly because expectations were raised that authorities would soon present a fiscal package to complement monetary and financial measures.