China is about to kick off issuance of the first batch of its 1 trillion yuan ($138 billion) of ultra-long special treasury bonds this week as the country raises fund to step up support to the economic recovery.
China’s Ministry of Finance will issue 30-year special treasury bonds on May 17, 20-year special treasury bonds on May 24 and 50-year special treasury bonds on June 14, according to a notice released by the ministry on Monday.
In a separate notice later on the day, the ministry said that it will issue 40 billion yuan of 30-year special treasury bonds on May 17, the first batch of such bonds this year.
The treasury bonds will start to accrue interest from May 20, 2024, and interest will be paid semiannually, with interest payment dates on 20 May and 20 November each year, and the principal and the last interest will be repaid on May 20, 2054, it said.
China announced plans for the bond sale during the National People’s Congress in March as policymakers vowed to ramp up fiscal support for the economy. It’s only the fourth such sale in the past 26 years, with the most recent one in 2020 when authorities issued 1 trillion yuan worth of those bonds to pay for pandemic response measures.
It’s only the fourth such sale in the past 26 years, with the most recent one in 2020 when authorities issued 1 trillion yuan worth of those bonds to pay for pandemic response measures.
The planned sale comes as the latest data showed a broad credit measure in April shrinking for the first time as government bond sales slowed. New bond issuance by Chinese authorities and policy banks fell in the first quarter to half of the level last year as regions with high debt risks were restricted from borrowing, and funds raised from last year’s sales were still being deployed.
Bond sales have been accelerating in recent weeks. Provincial governments sold the highest amount of new notes last week since February, responding to a call by top leaders to speed up local bond issuance. The 24-man Politburo also vowed in April to start the sale of special sovereign debt “at an early date.”
The central debt sale will help “speed up fiscal spending, which has been slow so far,” said Ding Shuang, chief economist for Greater China and North Asia at Standard Chartered Plc. “An adequate implementation of the budget can help sustain the positive growth momentum in the first quarter and increase the chance of achieving 5% growth.”
He expects the PBOC to lower banks’ reserve requirement ratio to ensure ample liquidity, forecasting a 25-basis point reduction to coincide with the bond sale. This could increase the opportunity for a loan prime rate cut, he added.