The CCP Is About To Issue 750 Billion Yuan Of The Government Bonds

On December 9th, according to a statement issued by the Chinese Ministry of Finance, the CCP will issue special government bonds worth 750 billion yuan (US$108 billion) on December 12 to designated domestic bonds in the inter-bank bond market. The statement also said the People’s Bank of China would conduct open market operations with relevant banks. This implies that the central bank will likely provide liquidity support for banks to buy bonds. China’s Ministry of Finance did not specify whether the bonds were newly issued or were refinancing maturing bonds. According to data compiled by Bloomberg, China once issued government bonds in 2007, one of which was 750 billion Yuan, due to grow on December 11 this year. Bloomberg Economics report that the newly announced issue will likely be an extension of the existing bond due on December 11 and will not impact the central government’s deficit. “We estimate that China’s overall government deficit in 2023 — the general budget balance and the increase in local government special bonds — is likely to be 7.3 trillion yuan, about 5.6% of GDP,” said economist David Qu in a note. Economists have urged Beijing to issue special government bonds to prop up the economy, which coronavirus measures and a real estate slump have battered. China’s Politburo, a top decision-making body, has pledged to seek a “general improvement” in the economy next year if Beijing backs away from its Covid-Zero strategy. According to economists, it cannot be ruled out that the bonds represent a stimulus. Many experts believe that the Chinese economy is currently in the worst state since the 1970s.