China approves £110bn sovereign bond issue
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Beijing has backed a major sovereign bond issue as the authorities look to boost China’s faltering economy.
According to state media, the Standing Committee of the National People’s Congress - China’s most senior legislative body - has backed a 1trn yuan (£110bn) sovereign bond issue. It also passed a bill allowing local governments to frontload part of their 2024 bond quotas.
The state news agency Xinhua said the funds raised would be used to support the rebuilding of flood-hit areas and improve urban infrastructure to prevent further damage from natural disasters.
The move is expected to widen the country’s 2023 budget deficit to around 3.8% of GDP, from 3% previously.
According to Reuters, vice finance minister Zhu Zhongming said at a news conference on Wednesday: "After the treasury bonds funds are put into use, it will help drive domestic demand and further consolidate the recovery of the economy."
Stephen Innes, managing partner at SPI Asset Management, said: "This unexpected decision has raised eyebrows, as there are alternative measures available that involve fewer institutional and political obstacles.
"This decision suggests a commitment to supporting economic growth and addressing fiscal challenges at various levels of government. It also hints at a potential future shift in China’s fiscal approach."
China’s economy, the world’s second largest, has been knocked by stringent Covid lockdowns, weaker global demand and the ongoing crisis in the country's heavily-indebted property sector.