Chinese authorities have agreed to issue three trillion yuan ($411 billion) in special treasury bonds next year, which would be the highest ever, as Beijing steps up fiscal stimulus to revive the faltering economy, two sources said.
The 2025 sovereign debt issuance plan would be a sharp increase from 1 trillion yuan this year, and comes as Beijing prepares to soften the blow from an expected increase in US tariffs on Chinese imports when Donald Trump returns to the White House in January.
The sources said that the proceeds will target boosting consumption through support programs, upgrading equipment by companies, and financing investments in advanced sectors led by innovation, among other initiatives.
The sources familiar with the discussions requested anonymity due to the sensitivity of the matter.
The State Council Information Office, which handles media inquiries on behalf of the government, the Ministry of Finance and the National Development and Reform Commission, did not immediately respond to a Reuters request for comment.
China’s 10-year and 30-year Treasury bond yields rose by 1 basis point and 2 basis points, respectively, following the news.
The private issuance of Treasury bonds scheduled for next year will be the largest ever and underscores Beijing’s desire to delve deeper into debt to counter deflationary forces in the world’s second-largest economy.
China does not generally include long-term special bonds in its annual budget plans, seeing the tool as an exceptional measure to raise proceeds for specific projects or political goals as needed.
As part of next year’s plan, about 1.3 trillion yuan will be raised through special long-term treasury bonds to finance “two major programs” and “two new programs,” the sources familiar with the matter said.
The “new” initiatives consist of a durable goods subsidy program, where consumers can trade in old cars or appliances and buy new ones at a discount, and a separate program that supports large-scale equipment modernization for businesses.
“Major” programs refer to projects that implement national strategies such as building railways, airports, farmland and building security capacities in key areas, according to official documents.
The state National Development and Reform Commission said on December 13 that Beijing has fully allocated all proceeds from 1 trillion yuan of long-term special treasury bonds this year, with about 70% of the proceeds to finance the “two key projects” and the rest going toward the “two key projects.” New plans.”
Threat of tariffs
Another large portion of the proceeds planned for next year will be to invest in “new productive forces,” Beijing’s shorthand for advanced manufacturing, such as electric cars, robotics, semiconductors and green energy, the sources said.
One source said that the amount allocated for this initiative will exceed one trillion yuan.
The remaining proceeds will be used to recapitalize large state banks, as major lenders suffer from shrinking margins, faltering profits and rising bad loans, the sources said.
The issuance of new private treasury debt next year will be equivalent to 2.4% of the country’s 2023 GDP. Beijing raised 1.55 trillion yuan through these bonds in 2007, or 5.7% of the country’s economic output at the time.
President Xi Jinping and other senior officials met at the annual Central Economic Work Conference from December 11 to 12 to chart the economic course for 2025.
A state media summary of that meeting said it was “necessary to maintain steady economic growth,” raise the fiscal deficit and issue more government debt next year, but did not give specific numbers.
Reuters reported last week, citing sources, that China plans to raise its budget deficit to a record level of 4% of GDP next year and maintain its economic growth target at around 5%.
At the CEWC, Beijing sets targets for economic growth, budget deficit, debt issuance and other targets for next year. These targets, which are usually agreed by senior officials at the meeting, will not be formally announced until Parliament’s annual meeting in March, and could change before then.
The Chinese economy is suffering this year due to a severe real estate crisis, high local government debt, and weak consumer demand. Exports, one of the few bright spots, could soon face US tariffs exceeding 60% if Trump follows through on his campaign pledges.
While risks to exports mean China will need to rely on domestic sources of growth, consumers feel less affluent due to lower property prices and minimal social welfare. Weak household demand is also a major risk.
Last week, Chinese officials said Beijing plans to expand consumer goods and industrial equipment trade programs to include more products and sectors.