On March 12, 2023, the fifth plenary session of the 14th National People’s Congress was held in Beijing. The national flag of the People’s Republic of China flew in front of the Great Hall of the People.
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Chinese authorities have agreed to issue 3 trillion yuan ($411 billion) worth of special government bonds next year, two sources said, which would be the largest on record, as Beijing steps up fiscal stimulus to revive the economy. A faltering economy.
Sovereign debt issuance plans for 2025 will be significantly higher than this year’s 1 trillion yuan, and comes as Beijing prepares to ease U.S. tariffs on Chinese imports when Donald Trump returns to the White House in January Anticipated tariffs.
Sources said the proceeds will be used to stimulate consumption through subsidy programs, corporate equipment upgrades and investment in advanced industries driven by innovation.
Sources familiar with the discussions declined to be named because of the sensitivity of the matter.
The State Council Information Office, which handles media inquiries on behalf of the government, finance ministry and National Development and Reform Commission (NDRC), did not immediately respond to a Reuters request for comment.
The planned issuance of special bonds next year would be the largest ever and underscore Beijing’s willingness to pile on debt further to counter deflationary forces in the world’s second-largest economy.
China generally does not include ultra-long-term special bonds in its annual budget plans because it views the instrument as an extraordinary measure to raise funds for specific projects or policy objectives as needed.
People familiar with the matter said that as part of next year’s plan, about 1.3 trillion yuan raised through long-term special government bonds will be used to fund the “two major” and “two new” projects.
These “new” initiatives include a durable goods subsidy program that allows consumers to trade in old cars or appliances and buy new ones at a discount, and a separate subsidy program that subsidizes large-scale equipment upgrades by businesses.
According to official documents, “major” projects refer to projects that implement national strategies and build security capabilities in key areas such as railways, airports, and farmland construction.
The National Development and Reform Commission stated on December 13 that this year’s 1 trillion yuan of ultra-long-term special government bond funds have been fully allocated, of which about 70% has been used for the “two major” projects, and the remaining funds have been used for the “two major” projects.
Tariff threat
Another large chunk of planned earnings next year will be used to invest in “new productivity,” Beijing’s shorthand for advanced manufacturing, such as electric vehicles, robots, semiconductors and green energy, sources said.
One source said the measure would be earmarked for more than $1 trillion.
Sources said the remaining proceeds will be used to recapitalize major state banks as top lenders face shrinking profits, falling profits and rising bad loans.
Newly issued special government bonds next year will be equivalent to 2.4% of the country’s gross domestic product (GDP) in 2023. In 2007, Beijing raised 1.55 trillion yuan through such bonds, equivalent to 5.7% of China’s economic output at the time.
On December 11 and 12, President Xi Jinping and other senior officials met at the annual Central Economic Work Conference to plan the direction of economic development in 2025.
A state media summary of the meeting said it was “necessary to maintain stable economic growth”, increase the fiscal deficit ratio and issue more government debt next year, without mentioning specific figures.
Reuters quoted sources last week as saying that China plans to increase the budget deficit to a record 4% of GDP next year and maintain an economic growth target of around 5%.
At the CEWC, Beijing laid out its economic growth, budget deficit, debt issuance and other goals for the year ahead. The targets, usually agreed at meetings by senior officials, are not formally announced until the annual parliamentary meeting in March and could still change before then.
China’s economy has struggled this year due to a severe real estate crisis, high local government debt and weak consumer demand. One of the few bright spots is exports, which could soon face U.S. tariffs of more than 60% if Trump follows through on his campaign promises.
While export risks mean China will need to rely on domestic sources of growth, consumers are feeling less wealthy due to falling house prices and meager social benefits. Weak household demand is also a major risk.
Last week, Chinese officials said Beijing planned to expand trade-in programs for consumer goods and industrial equipment to cover more products and industries.
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