2023-10-24 23:16:00
China’s highest parliamentary body approved a sovereign bond issue for 1 trillion yuan (REUTERS/Tingshu Wang//File Photo)
China’s top parliamentary body approved a 1 trillion yuan ($137 billion) sovereign bond issue and authorized a bill to allow local governments to advance part of their 2024 bond installments, state media reported Tuesday. , in a measure to support the economy.
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Funds raised from the new sovereign bonds will support the reconstruction of disaster-hit areas in the country and improve urban drainage prevention infrastructure to boost China’s ability to withstand natural disasters, state news agency Xinhua said.
This will widen the country’s budget deficit in 2023 to around 3.8% of gross domestic product, from 3% previously set, Xinhua said.
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Archyde.com reported on Monday that China’s parliament was close to approving just over 1 trillion yuan in additional sovereign debt issuance, citing sources.
The approval of the bill by the Standing Committee of the National People’s Congress (NPC) came at the conclusion of a five-day meeting.
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“The additional fiscal support approved today is the intervention we expected and was necessary to avoid a sharp fiscal tightening in China in the final weeks of the year,” said Mark Williams, chief Asia economist at Capital Economics. “Fiscal policy has been a prop for expansion in China in recent quarters. These new measures will maintain their support, but will not provide an additional boost.”
The world’s second largest economy grew faster than expected in the third quarter (REUTERS/Florence Lo/Illustration/File)
The world’s second-largest economy grew faster than expected in the third quarter, improving the chances that Beijing can meet its growth target of around 5% by 2023. But economists say the persistent drag on the real estate sector remains weighing on the economic prospects.
“It is unusual for central government fiscal plans to be reviewed outside the normal budget cycle, so this move indicates a clear concern about short-term growth,” Williams said.
China has previously allowed local governments to issue bonds ahead of the annual session of parliament, which approves the government’s budget plans and is usually held in March.
Local governments had been told to complete the issuance of the 2023 quota of 3.8 trillion yuan in special local bonds by September to finance infrastructure projects. The Government has not revealed the amount of the anticipated bond installments of local administrations for 2024.
Chinese authorities have so far avoided aggressive fiscal stimulus to bolster the economy, although the housing crisis and other problems continue to pose risks.
In recent weeks, Beijing has unveiled a series of measures, including increased spending on public works, interest rate cuts, easing real estate policy and efforts to shore up the private sector, after growth momentum of China fell.
But its ability to stimulate growth has been hampered by fears about debt risks and the fragility of the yuan.
(With information from Archyde.com)
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