What’s special about China’s ultra-long special government bonds-Xinhua

Employees work in a factory of Wuchang Shipbuilding Industry Group Co., Ltd. in Wuhan, central China’s Hubei province, May 16, 2024. (Xinhua/Du Zixuan)

BEIJING, May 21 (Xinhua) — With the issuance of this year’s first batch of its ultra-long special government bonds worth 1 trillion yuan (141 billion U.S. dollars), China has taken steps to use rarely used fiscal policy to boost the economy to consolidate. growth momentum from a long-term perspective.

As Prime Minister Li Qiang noted, this step is intended to support the implementation of key national strategies and build security capacity in key areas.

Candidate projects supported by the bonds have yet to be confirmed, but key areas have been announced.


Zheng Shanjie, director of the National Development and Reform Commission, unveiled a list of areas to be supported, including scientific and technological innovation, integrated urban-rural development, coordinated regional development, food and energy security and high-quality population growth. .

According to experts, this is in stark contrast to previous issues.

China’s first three special government bond issuances were all driven by the need to address specific pressing risks and challenges, said Wen Bin, chief economist at China Minsheng Bank. For example, in 1998 it aimed to replenish bank capital in response to the 1997 Asian financial crisis and the deterioration of the asset quality of domestic commercial banks, while in 2020 the aim was to cope with the negative consequences of the epidemic on the economy. , said Wen.

China separately issued new special government bonds in 1998, 2007 and 2020. Of the total issuance, 39.8 percent, or 1.12 trillion yuan (about $157.7 billion), is ultra-long, according to a research note co-authored by Wen with his colleagues Sun Ying and Han Sida.

The primary focus of the latest issuance, the fourth of its kind, is to promote China’s modernization, promote high-quality development and seize the initiative in development, Li said during a video conference.

Local authorities actively seek policy support by promoting suitable projects. After the video conference, Wang Hao, Governor of Zhejiang Province in eastern China, convened a working conference on the same day, urging the accelerated establishment of a pool of candidate projects covering major national strategies and key areas identified by the Prime Minister were emphasized.

Wang instructed the provincial government to carefully plan to secure “large, healthy and high-quality” projects in areas such as scientific and technological innovations, forward-looking industries and urban-rural integration.


Insiders believe that the issuance of ultra-long special government bonds is an important part of this year’s proactive fiscal policy, which will help boost market confidence and expectations and better support economic development.

Lian Ping, chairman of the China Chief Economist Forum, said ultra-long special government bonds can boost current investment and consumption, lay a solid foundation for high-quality long-term development, provide tranquility to local government finances and multi-faceted benefits can deliver.

“The ultra-long special government bonds will not be included in the budget deficit, and can be issued at an appropriate time based on market and economic conditions, following the trend of moderately increasing central government influence to ensure flexibility,” said Bruce Bang. , the Greater China chief economist at JLL, a real estate and investment management company.

“The ultra-long special government bonds are more flexible in project approval, issuance and use,” said Zhang Jun, chief economist of China Galaxy Securities. “Compared with regular government bonds, such bonds can alleviate the pressure of debt repayment in the short to medium term, trading time for space to resolve the imbalance between economic development and local debt.”

Yao Yang, dean of Beijing University’s National School of Development, noted that the issuance of ultra-long special government bonds could boost confidence in various aspects. “If the funds can be used to support the activities of local governments, this will also help improve the business environment.”

“From the perspective of investors, such an arrangement can stabilize market expectations, especially regarding market interest rates, and thus contribute to the stability of the financial market,” said Wen Laicheng, professor at the Central University of Finance and Economics, noting Despite the slight scarcity of 50-year bonds, the Ministry of Finance has announced specific issuance dates, with 20- and 30-year government bonds available almost every month.

“Driven by these special government bonds, the size of government loans has been further expanded this year, requiring the central bank to create a good liquidity environment so as not to harm the stable operation of the banking system and cause a crowding-out effect. of private investment,” said Ma Guangrong, vice dean of the School of Finance at Renmin University of China.

Special government bonds with an ultra-long term usually refer to bonds with a term of more than ten years. This year, China plans to start issuing such bonds with maturities of 20 years, 30 years and 50 years on May 24, May 17 and June 14, respectively. The issuance of the last batch of these bonds will be completed by mid-November.