CHINA’S new sovereign bonds will help bolster the economic recovery, Zhu Zhongming, vice finance minister, said yesterday.

China’s top parliament body has approved a 1 trillion yuan (US$137 billion) in sovereign bond issuance to help rebuild areas hit by this year’s floods and improve urban infrastructure to cope with future disasters, domestic media said Tuesday.

“After the treasury bond funds are put into use, it will help drive domestic demand and further consolidate the recovery of the economy,” Zhu said at a news conference.

The world’s second-largest economy grew faster than expected in the third quarter, improving the chances that the government can meet its growth target of around 5% for 2023.

In a rare move, China sharply lifted its 2023 budget deficit to around 3.8% of gross domestic product from an originally set 3% due to the rise in central government debt.

The proposed increase in bond issuance comes as the government prepares to inject a fresh dose of fiscal stimulus to shore up the economic recovery, policy insiders say.

China will reasonably set the pace of bond insurance and match the issuance with spending, Zhu said, adding that authorities will take steps to prevent bond fund misuses.

The government’s debt level is still within a reasonable range, the minister said, without giving details.

Half of the funds raised via the bond issuance will be spent this year and the other half will be used next year.

Analysts at UBS expect the government to raise its budget deficit and special local bond quotas for 2024, alongside further cuts in interest rates and bank reserve requirement ratios.

China’s parliament has also approved a bill to allow local governments to front load part of 2024 local bond quotas.

Local governments had been told to complete the issuance of the 2023 quota of 3.8 trillion yuan in special local bonds by September to fund infrastructure projects.

Zhu Min, a former deputy governor of the People’s Bank of China who also served as a deputy managing director of the International Monetary Fund, told Bloomberg yesterday that the stimulus plan that China just rolled out will boost new areas of the economy while avoiding funneling money into the property sector.

“The package is not huge or big but I think the impact will be big because it focuses on the climate-change issue” and other areas that will become “competitiveness sectors” for the economy, he said. (SD-Agencies)