China is stepping up efforts to stimulate economic recovery by enhancing the catalytic role of government investment. Recent meetings of the Political Bureau of the Central Committee of the Communist Party of China have signaled a shift in macroeconomic policy, emphasizing stronger countercyclical adjustments in fiscal and monetary policies to ensure sustained economic improvement.
On September 26, the Political Bureau convened to analyze the current economic situation and outline the next steps. The meeting highlighted the importance of guaranteeing necessary fiscal expenditures, ensuring that people’s basic living needs are met, salaries are paid, and primary-level governments function smoothly. A key focus is effectively utilizing ultra-long-term special treasury bonds and special local government bonds to leverage government investment and drive development.
This aligns with recent policy signals from the Ministry of Finance. On October 12, Minister of Finance Lan Fo’an announced plans to intensify countercyclical adjustments of fiscal policy to promote high-quality economic development. A package of targeted incremental fiscal measures is set to be introduced, including issuing special treasury bonds to support large state-owned commercial banks in replenishing core tier-1 capital and allowing special-purpose bonds to help stabilize the property market.
A significant fiscal priority is the prompt issuance and effective utilization of one trillion yuan ($141 billion) of ultra-long-term special treasury bonds and 3.9 trillion yuan of newly issued special bonds. As of September 25, approximately 3.6 trillion yuan of the new special-purpose bonds had been issued, with the remaining 300 billion yuan expected to be issued soon. The balance of outstanding special bonds stood at around 28.2 trillion yuan, below the ceiling of 29.5 trillion yuan. The issuance of the one trillion yuan of ultra-long-term special treasury bonds is projected to be completed by mid-November.
Proper utilization of special bonds is seen as crucial for expanding effective investment and harnessing the catalytic role of government spending. This year marks a vigorous effort in issuing special bonds, with the planned 3.9 trillion yuan being the largest amount in history. However, the issuance has faced challenges due to factors such as yield requirements for projects, local governments’ financial constraints in providing matching funds, and weaknesses in the project management system.
To address these challenges, the Ministry of Finance has proposed expanding the scope of special bond usage. This includes supporting the acquisition of land reserves and existing commercial housing stock for government-subsidized housing and reasonably supporting infrastructure construction for forward-looking, strategic emerging industries. These measures aim to optimize the usage and management of special bonds, effectively leverage government investment, stabilize the property market, and expand effective investment.
By enhancing the catalytic role of government investment, China aims to rally the entire society toward sustained economic recovery and improvement. The coordinated efforts between fiscal policy adjustments and the effective utilization of special bonds are expected to play a significant role in driving high-quality economic development.
Reference(s):
cgtn.com
