China Gives its Economy a New Boost

China will start issuing long-term bonds on Friday in a bid to prime the pump of its cooling economy.

The government will begin issuing this year’s total of 1 trillion yuan ($138.23 billion) in “ultra-long special treasury bonds,” China’s cabinet-like State Council revealed on Monday.

The sovereign bonds were announced by China’s No. 2, Premier Li Qiang in March during the annual meeting of the country’s rubber-stamp congress. He also set a GDP growth target of around 5 percent, matching last year’s reported figure that some economists have called into doubt.

The initial tranche of bonds will have 30-year maturities, followed by the issue of 20-year varieties starting on May 24 and 50-year ones on June 14.

Chinese 100 Yuan Notes
Former top Chinese Communist Party leader Mao Zedong on 100 yuan notes. China will start issuing long-term bonds Friday in an effort to boost its cooling economy.

Frederic J. Brown/AFP via Getty Images

More ultra-long bonds will be issued over the next “several” years, the State Council added, without specifying the amount.

Newsweek reached out to the Chinese embassy in Washington, D.C., via emailed request for comment.

During a video conference on Monday, Li said the long-term bonds a would contribute to China’s modernization and foster “high-quality development,” according to state media.

He touted the issue as part of a diverse set of economic tools to be used in support of national strategies and secure key sectors.

He called for the construction of new major projects, stronger project management, and reforms and innovation to solve systemic problems.

“High-quality development” is a term often employed by Chinese President Xi Jinping and is often framed as more sustainable, innovation-driven development rather than growth for its own sake.

The bonds are intended to help fund regional development, integration of development in urban and rural areas, energy and food security, and reversing the country’s declining population, the State Council cited Zheng Shanjie, director of the National Development and Reform Commission, as saying.

State-run media outlet the Global Times cited Beijing-based economist Tian Yun as saying the long-dated bonds can help avoid spikes in public spending at a time when many of Chinese local governments are mired in debt.

“Ultra-longs can ease cash flows at the margin but won’t really have a marked impact,” University of Oxford China Centre economist George Magnus told Newsweek when asked about the potential impact of the bonds on public debt.

“China’s problem isn’t the maturity profile of its debt, but the dead weight of the burden of debt and the fact that local and provincial governments, with some exceptions, are short of cash and revenues and struggling to service debt and provide public goods and services,” he added.

China posted better-than-expected economic growth for the first quarter of 2024, though in several sectors it took place mainly in the first two months, tapering off by March.

Expansion in the manufacturing sector ticked upward last month but by a slimmer margin than March, suggesting the post-pandemic recovery of the world’s second-largest economy remains uneven.