Regional authorities in China are reserving projects to be funded by special treasury bonds, having been told by Beijing to shoulder the responsibility for economic stabilisation.
The proposals are mainly concerned with food, energy and supply chain security, as well as urbanisation and rural revitalisation strategies, the Guangzhou-based 21st Century Business Herald reported on Wednesday, citing several unidentified sources.
At the time, officials said the bonds approved in October were earmarked for supporting reconstruction and improving disaster prevention and relief capabilities.
Will Beijing lead spending drive to aid local governments grappling with debt?
Will Beijing lead spending drive to aid local governments grappling with debt?
China’s budget deficit ratio was raised to about 3.8 per cent of gross domestic product (GDP) after the new sovereign bonds were approved in October, taking it above the 3 per cent target set in March last year, which was widely considered as a red line.
Beijing has vowed to further its proactive fiscal policies in 2024 to stabilise and shore up the economy.
The world’s second-largest economy is expected to keep a high deficit ratio this year, as well as a higher local bond quota, as it wants to lift market confidence with further consolidation of its economic recovery.
The GDP growth target, fiscal deficit ratio and local bond quota are set to be confirmed in the premier’s work report delivered at the opening of the annual parliamentary session in early March.
China has a record of using long-term bonds to fund special projects or tackle extraordinary challenges.
In 1998, the Ministry of Finance issued 270 billion yuan worth of 30-year bonds to replenish the capital of the four largest state-owned commercial banks.
In 2007, US$200 billion of bonds were sold to inject capital into China’s sovereign wealth fund, the China Investment Corporation, while another 1 trillion yuan of bonds were issued in 2020 as the coronavirus pandemic strained government finances.
China seeks economic ‘strength down the road’ with 1 trillion yuan debt plan
China seeks economic ‘strength down the road’ with 1 trillion yuan debt plan
Overall, the debt burden of China’s central government is relatively low, accounting for just 22.6 per cent of the national GDP at the end of September, according to the National Institution for Finance and Development.
Some local governments have been selecting and submitting infrastructure and livelihood projects since the end of 2023.
Officials in some districts and counties in the northern province of Hebei have already requested “expeditious selection and submission of project candidates and increased lobbying with provincial authorities”, according to local media reports.
Authorities have already convened meetings and created task forces since the end of last year, as local officials vowed to seize the “window of opportunity” to plan and submit projects.
