China plans record $411 billion special treasury bond issuance next year, sources say

Chinese authorities have agreed to issue 3 trillion yuan ($411 billion) worth of special treasury bonds next year, two sources said, which would be the highest on record, as Beijing ramps up fiscal stimulus to revive a faltering economy.

The plan for 2025 sovereign debt issuance would be a sharp increase from this year’s 1 trillion yuan and comes as Beijing moves to soften the blow from an expected increase in US tariffs on Chinese imports when Donald Trump takes office in January.

The proceeds will be targeted at boosting consumption via subsidy programmes, equipment upgrades by businesses and funding investments in innovation-driven advanced sectors, among other initiatives, said the sources.

The sources, who have knowledge of the discussions, declined to be identified due to sensitivity of the matter.

The State Council Information Office, which handles media queries on behalf of the government, the finance ministry and the National Development and Reform Commission (NDRC), did not immediately respond to a Reuters request for comment.

China’s 10-year and 30-year treasury yields rose 1 basis point (bp) and 2 bps, respectively, after the news.

The planned special treasury bond issuance next year would be the largest on record and underscores Beijing’s willingness to go even deeper into debt to counter deflationary forces in the world’s second-largest economy.

The issuance “exceeded market expectations,” said Tommy Xie, head of Asia Macro research at OCBC Bank.

“Furthermore, as the central government is the only entity with meaningful capacity for additional leverage, any bond issuance at the central level is perceived as a positive development, likely providing incremental support for growth.”

China does not generally include ultra-long special bonds in annual budget plans, as it sees the instruments as an extraordinary measure to raise proceeds for specific projects or policy goals as needed.

As part of next year’s plan, about 1.3 trillion yuan to be raised through long-term special treasury bonds would fund “two major” and “two new” programmes, said the sources with knowledge of the matter.

The “new” initiatives consist of a subsidy programme for durable goods, allowing consumers to trade in old cars or appliances and buy new ones at a discount, and a separate one that subsidises large-scale equipment upgrades for businesses.

The “major” programmes refer to projects that implement national strategies such as construction of railways, airports and farmland and build security capacity in key areas, according to official documents.

The state planner NDRC said on Dec. 13 Beijing had fully allocated all proceeds from this year’s 1 trillion yuan in ultra-long special treasury bonds, with about 70 per cent of proceeds financing the “two major” projects and the remainder going towards the “two new” schemes.

Tariffs threat

Another big portion of the planned proceeds for next year would be for investments in “new productive forces”, Beijing’s shorthand for advanced manufacturing, such as electric vehicles, robotics, semiconductors and green energy, the sources said.

Last week, officials said Beijing plans to expand the consumer goods and industrial equipment trade-in programmes.