China launches massive bond issue to raise 130 billion euros

2023-10-24 15:22:00

China uses fiscal leverage. The Chinese state announced through the official Xinhua news agency this Tuesday that it was launching a sovereign bond issue amounting to 1,000 billion yuan (approximately 130 billion euros), for this purpose. experts interpret it as an attempt to support economic activity following a slow post-Covid recovery.

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The funds thus raised will then be donated to local governments to help with disaster prevention and national recovery, state media Xinhua said. These government bonds will thus be issued in the fourth quarter.

Payment to local governments

« All additional treasury bonds will be allocated to local governments through transfer payments, to focus on supporting post-disaster recovery and reconstruction, to fill gaps in disaster prevention, reduction and relief. disasters, and to improve our country’s capacity to resist natural disasters “, published Xinhua.

This decision appears “ very unusual » et « was a surprise on the market “, says Zhang Zhiwei, analyst at Pinpoint Asset Management. “ I view this policy as a further step in the right direction: China should make its fiscal policy more expansive, given the deflationary pressures in the economy », he continues in an analytical note. “ Part of the funds raised will be used next year, helping to improve growth prospects beyond the fourth quarter ».

Reviving flagging growth

Last Wednesday, the Chinese National Bureau of Statistics (NBS) revealed on Wednesday a slowdown in Chinese economic growth in the third quarter (+4.9% year-on-year), a serious brake on the activity of the second power. global economy since the latter stood at +6.3% in the second quarter.

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As a reminder, China aims “ environ 5% » growth this year, a figure also given by the International Monetary Fund in its estimate of October 10, when it targeted a 5.2% increase in July. But this objective might be difficult to achieve without a massive recovery plan, believe some economists while the government favors targeted measures. “ More robust measures » will be necessary, estimates analyst Gene Ma of the Institute of International Finance (IIF). Hence this massive obligation.

(With AFP)