China to issue record special treasury bonds in 2025 to bolster economy
This plan of a significant increase from the 1 trillion yuan issued in 2024 highlights Beijing's push for stronger fiscal stimulus to support an economy facing headwinds.
The move comes as Chinese officials brace for the potential impact of higher U.S. tariffs under Donald Trump's incoming administration. The funds raised will focus on stimulating consumption through subsidy programs, supporting business equipment upgrades, and driving innovation in advanced industries, the report said.
Following the announcement, yields on China's 10-Year and China 30-Year treasury bonds edged up by 1.7 and 2.1 basis points, respectively.
The planned special treasury bond issuance in 2025 would mark the largest on record and underlines Beijing's readiness to go even deeper into debt to counter deflationary pressures and maintain economic momentum.
"The issuance 'exceeded market expectations," noted Tommy Xie, head of Asia Macro (BCBA:BMAm) research at OCBC Bank. He added that since the central government is best positioned to take on additional debt, such measures are viewed positively and are expected to provide further economic support.
China typically reserves special treasury bonds for targeted policy objectives, bypassing standard budget plans. These instruments are considered a tool for extraordinary circumstances, allowing the government to secure funding for specific projects.
Out of the total issuance planned for 2025, approximately 1.3 trillion yuan will be allocated to finance “two major” and “two new” initiatives, the sources told Reuters.
The "new" programs include subsidies for consumers to replace old cars and appliances, as well as incentives for businesses to upgrade large-scale equipment. The "major" projects will focus on infrastructure development, such as building railways, airports, and farmland, while also strengthening national security capabilities.
According to the report, a significant portion of China’s planned 3 trillion yuan special treasury bond issuance for next year will be directed toward investments in "new productive forces," a term used by Beijing to describe advanced manufacturing sectors like electric vehicles, robotics, semiconductors, and green energy.
One of the sources reportedly indicated that over 1 trillion yuan will be allocated to this initiative. The remaining funds will be used to recapitalize major state-owned banks, which are grappling with narrowing margins, declining profits, and rising levels of bad debt.
The planned bond issuance for 2025 represents approximately 2.4% of China's 2023 gross domestic product (GDP). For comparison, Beijing raised 1.55 trillion yuan in special bonds in 2007, equivalent to 5.7% of the country’s economic output at the time.