China approves $137bn sovereign bonds to help economy, control govt debt
Business
Move boosts stocks in ongoing trading on Wednesday
BEIJING (Reuters) - China's new sovereign bonds will help bolster the economic recovery, China's vice finance minister Zhu Zhongming said on Wednesday, adding that the government debt level is still within a reasonable range.
China's top parliament body has approved a 1 trillion yuan ($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, state media said on 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 Beijing can meet its growth target of around 5 per cent for 2023. But economists say the crisis-hit property sector remains a drag on the economy and continues to cloud the growth outlook.
China's 2023 budget deficit will increase to around 3.8pc of gross domestic product from a previously set 3pc due to the rise in central government debt, Xinhua said.
The proposed increase in bond issuance comes as Beijing prepares to inject a fresh dose of fiscal stimulus to shore up the economic recovery, policy insiders say.
Half of the funds raised via the bond issuance will be spent this year and the other half will be used next year, according to state media said.
MARKET REACTION
China led Asia's stock markets were higher on Wednesday as investors cheered the approval of a trillion-yuan sovereign bond issue as a harbinger of stimulus, while the Aussie dollar hit a two-week high as hotter-than-expected inflation lifted rate forecasts.
MSCI's broadest index of Asia-Pacific shares outside Japan has so far rose 0.9pc and the Hang Seng 2pc. Japan's Nikkei rose 1.1pc.
Bonds have held onto a bounce-back after the 10-year Treasury yield breached 5pc on Monday, with the benchmark yield firm at 4.82pc in Tokyo trade.
Overnight solid earnings and US economic data lifted Wall Street indexes, while oil and the euro had dropped on weaker-than-forecast purchasing managers surveys on the continent. US and European stock futures were steady in early Asia trade.
Also helping the mood was China’s state-owned investment company Central Huijin announcing it was buying exchange-traded funds, a move which has sparked strong rallies in the past.
"Government expenditure will help the economy to stabilise further and strengthen growth in the fourth quarter," said Steven Leung, executive director of institutional sales at broker UOB Kay Hian in Hong Kong.
Central Huijin promising ETF purchases drove rallies of more than 20pc in 2013 and 2015, according to UOB, and Leung said the signal had given a strong boost to sentiment.
China's blue-chip CSI300 index, which had been pinned near four-year lows, bounced 1pc.
NEW FINANCE CZAR
China has appointed Lan Foan, a technocrat with little central government experience, as the new finance minister, state media said on Tuesday, as the government ramps up fiscal stimulus in a bid to revive the economy.
Lan, 61, who was named the Communist Party chief at the finance ministry last month, has succeeded Liu Kun who had been finance minister since 2018.
Previously, Lan was the party chief of the northern Chinese Shanxi province.
Lan's appointment, which is widely expected, comes as China ramps up fiscal stimulus to shore up its economic recovery, drawing on a well-used playbook that relies heavily on debt and state spending but falls short on the deeper reforms.
Besides approving issuance of sovereign bonds, the Chinese parliament also passed a bill that will allow local governments to front load part of their 2024 bond quotas.
Lan began his career at the finance department of the southern Guangdong province in 1985, after graduating from the Hubei University of Finance and Economics, and became a vice provincial chief in 2016, according to his profile.
He transferred to Shanxi in 2021, as the province's vice party chief, before becoming the party chief in Dec 2022.
Liu, China's finance minister since 2018, has surpassed the official retirement age of 65 for minister-level officials.
