China’s 1 trillion yuan sovereign debt plan offers ‘positive growth implications’, Beijing eager to strengthen down the road
- China’s budget deficit ratio to be raised to about 3.8 per cent of gross domestic product by approving 1 trillion yuan (US$137 billion) issuance of sovereign bonds
- National People’s Congress also allows local governments to front-load part of their 2024 bond quota
China’s fiscal revision, including a 1 trillion yuan (US$137 billion) sovereign debt plan, was aimed at ensuring economic stability in the coming months amid a faltering property market and rising local government debt pressure, analysts said.
The new issuance, approved by the National People’s Congress on Tuesday, will raise the budget deficit ratio to about 3.8 per cent of gross domestic product (GDP) – well above the 3 per cent target set in March, which was widely considered as a red line.
Finance vice-minister Zhu Zhongming said the sovereign debt issuance was aimed at supporting reconstruction and improving disaster prevention and relief capabilities.
The nation’s legislature also passed a bill to allow local governments to front-load part of their 2024 bond quota to “maintain steady investment, expand domestic demand and strengthen weak links”, the official Xinhua News Agency reported on Tuesday.
It is to make up for shortcomings, strengthen down the road, and protect people’s livelihood
“[Raising the on-budget fiscal deficit ratio] suggests Beijing may not be complacent with recent growth stabilisation and may have become more willing to add more debt, especially on-budget government debt, as local government’s off-budget borrowings have become increasingly unsustainable,” Japanese investment bank Nomura said on Wednesday.