January 03, 2025 (MLN): China will sharply increase funding from ultra-long treasury bonds in 2025 to spur business investment and consumer-boosting initiatives, a state planner official said on Friday.

Beijing is cranking up fiscal stimulus to revitalize the faltering economy, as Reuters reported.

Special treasury bonds will be used to fund large-scale equipment upgrades and consumer goods trade-ins.

Yuan Da, deputy secretary-general of the National Development and Reform Commission (NDRC), announced this at a press conference.

"The size of ultra-long special government bond funds will be sharply increased this year to intensify and expand the implementation of the two new initiatives," Yuan said.

Under the program launched last year, consumers can trade in old cars or appliances and buy new ones at a discount.

A separate program subsidizes large-scale equipment upgrades for businesses.

Households also will be eligible for subsidies to buy three types of digital products this year, including cell phones, tablets, smartwatches and bracelets, Yuan said.

In December, the NDRC announced that Beijing had fully allocated all proceeds from 1 trillion yuan ($136.68 billion) in ultra-long special treasury bonds for 2024.

About 70% of the proceeds will finance "two major projects," with the remainder allocated to new initiatives.

Chinese leaders have pledged to "vigorously" boost consumption this year, raising expectations of more policy steps to spur demand and fight deflationary risks.

Millions of government workers across China were given surprise wage increases this week, people affected by the move said, as Beijing looks to boost spending.

China will also increase funding from special treasury bonds.

Additionally, it will expand the scope of another program that focuses on supporting key strategic sectors, Zhao Chenxin, vice head of the state planner, told the press conference.

The government has approved projects for 2025 worth 100bn yuan under this scheme in advance, he said.

The major programs refer to projects such as the construction of railways and airports, the development of farmland, and the building of security capacity in key areas, according to official documents.

The world's second-biggest economy has struggled over the past few years due to a severe property crisis, high local government debt, and weak consumer demand.

Exports, one of the few bright spots, could face more U.S. tariffs under a second Donald Trump administration.

Reuters reported last month that authorities have agreed to issue 3tr yuan worth of special treasury bonds in 2025, which would be the highest on record.

China is likely to allow local governments to increase the issuance of special bonds to 4.7tr yuan this year, up from 3.9tr yuan in 2024.

This projection was made by Zhang Ming, a senior economist at the Chinese Academy of Social Sciences, a top state think tank.

The combined special treasury and local bonds, along with the annual budget deficit, could approach 13tr yuan this year.

This amount represents 9-10% of gross domestic product, Zhang said in an article published on the website of China Chief Economist Forum.

"Such a level of broad-based deficit would be rare in history," Zhang said.

Reuters reported last month that Chinese leaders have agreed to raise the budget deficit to 4% of GDP in 2025, China's highest on record, while maintaining an economic growth target of around 5%.

NDRC's Yuan said China had ample policy space to underpin growth this year, Reuters further added.

"We are fully confident of driving continued economic recovery this year."

China's central bank is likely to cut its key policy rate from the current level of 1.5% "at an appropriate time" in 2025, the Financial Times reported on Friday.

The report cited comments from the bank, highlighting the move as part of Beijing's efforts to shore up growth.

Copyright Mettis Link News

Posted on: 2025-01-03T16:30:49+05:00