China GDP: economic growth expected to slip from 2025 after 1 trillion yuan bond bonanza wears off

Budget deficit ratio will be raised to about 3.8 per cent of gross domestic product after a 1 trillion yuan (US$137 billion) issuance of sovereign bonds was approved

But the impact of the ‘one-off’ move is set to to wear off, with tapering expected as the property market, youth unemployment and local government debts slow growth

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Finance vice-minister Zhu Zhongming said the sovereign debt issuance was aimed at supporting reconstruction and improving disaster prevention and relief capabilities. Photo: Xinhua

Published: 10:00am, 14 Nov 2023Updated: 1:28pm, 14 Nov 2023

China will face a wave of pressure late next year to implement tough economic reforms, as the effects of 1 trillion yuan (US$137 billion) of sovereign bonds starts to wear off, offshore financial institutions said.

The bond issuance passed by the National People’s Congress last month is expected to sustain economic stability into 2024.

It will be aimed at supporting reconstruction and improving disaster prevention and relief capabilities, with the first half set to be dispersed this year.

But the property market, youth unemployment and local government debts are set to slow China’s economic growth from 2025 onwards, the institutions added.

It doesn’t exactly augur well for potential growth in the medium and long term

Chris Beddor

“I think it’s a clear signal of a shift towards more fiscal support for the economy going into next year, probably the clearest signal we’ve received all cycle,” said Chris Beddor, deputy director for China research at macroeconomic research firm Gavekal Dragonomics.