China to Issue Ultra-Long-Term Bonds Starting This Week... "1 Trillion Yuan Scale"

China is finally moving forward with the issuance of ultra-long-term government bonds to stimulate the economy. The issuance size is estimated to be around 1 trillion yuan (approximately 189 trillion won).

On the 13th, the Chinese Ministry of Finance announced that it will begin issuing special central government bonds, including 30-year maturity bonds, starting from the 17th. The 20-year maturity bonds and 50-year maturity bonds will be issued from May 24 and June 14, respectively. The remaining 30-year maturity bonds are scheduled to be issued in November.

The Ministry of Finance did not disclose the total issuance size in the announcement. Earlier, Bloomberg News reported, citing sources, that Chinese authorities would start issuing ultra-long-term government bonds worth 1 trillion yuan from this week. The reported issuance sizes include 300 billion yuan (approximately 56.7 trillion won) for 20-year bonds, 600 billion yuan (approximately 113.4 trillion won) for 30-year bonds, and 100 billion yuan (approximately 18.9 trillion won) for 50-year bonds.

This bond issuance is interpreted as a measure to strengthen fiscal support for economic stimulus amid the prolonged real estate crisis in China. This is the fourth time the Chinese government has issued special bonds. The previous issuance was in 2020, when 1 trillion yuan worth of bonds were issued in response to the COVID-19 pandemic. The report noted, "As debt pressure on many local governments intensifies, the central government is expanding its borrowing."

Earlier, the Chinese government had announced at the National People's Congress (NPC) in March that it would begin issuing ultra-long-term special government bonds over the coming years starting this year. Recently, foreign media also reported that the People's Bank of China, the central bank, met with intermediaries ahead of the bond issuance to seek advice on pricing and related matters.

Ding Shuang, Chief Economist for Greater China and North Asia at Standard Chartered, said, "This will help accelerate the previously sluggish fiscal spending," adding, "Proper budget execution can maintain positive growth momentum in the first quarter and increase the likelihood of achieving a 5% growth rate." He also noted that the People's Bank of China might lower the reserve requirement ratio and cut interest rates by 0.25 percentage points to support liquidity.