China to Kick Off Issuance of $138 Billion Ultra-Long Bonds to Boost Economy

China is set to launch the initial phase of a significant financial initiative involving the issuance of 1 trillion yuan ($138 billion) in ultra-long special treasury bonds, starting from May 17 through November 15, 2024. This move is part of a broader strategy to bolster economic growth through increased infrastructure spending [para. 1][para. 2]. Premier Li Qiang announced this multi-year bond issuance program during the National People’s Congress in March, highlighting that the funds will be directed towards major national projects without affecting the official budget deficit [para. 3].

The distribution plan for these funds includes allocating half of the proceeds to central government initiatives and the other half to local governments. These investments will focus on key areas such as scientific and technological independence, urban-rural integration, regional development coordination, and enhancing food and energy security [para. 4][para. 5].

In response to these developments, financial experts anticipate further monetary easing measures by policymakers to ensure successful bond issuances. These may include reductions in banks' reserve requirement ratios aimed at increasing broad money supply and stimulating economic activity [para. 6].

Despite these efforts, China faces ongoing economic challenges including a persistent slump in the property market and weak consumer spending. The economy grew by 5.2% last year but achieving this year's target of approximately 5% GDP growth remains uncertain [para. 7]. Additionally, local governments might find their capacity for infrastructure investment curtailed due to recent measures aimed at reducing undisclosed borrowing practices [para. 8].

The detailed schedule for bond issuance includes multiple installments spread across different maturity periods: 20-year bonds will be issued monthly from May to November; 30-year bonds will see twelve installments starting from May 17; and three installments are planned for the 50-year bonds beginning on June 14 [para. 9]. This structured approach underscores China's commitment to long-term fiscal planning and economic stability.

Moreover, there is an expectation of increased government bond issuance in coming months following a notably slow start earlier in the year. This ramp-up includes not only these special ultra-long bonds but also a catch-up in local government bond issuances which have significantly lagged behind previous years’ figures despite wider budget deficits at local levels [para. 10].

Overall, China’s strategic deployment of ultra-long treasury bonds represents a pivotal effort to finance critical national projects while managing fiscal health amidst challenging economic conditions.