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China's Strategic Fiscal Move has unveiled plans to issue 3 trillion yuan ($411 billion) in special treasury bonds for 2025, marking the highest issuance on record. This initiative underscores Beijing's aggressive strategy to counter economic headwinds and invigorate growth amidst global and domestic challenges.
The issuance, a significant leap from 2024's 1 trillion yuan, aligns with anticipated economic pressures, including heightened U.S. tariffs under the returning Trump administration. Sources close to the matter reveal that the funds will be channeled into consumer subsidies, advanced manufacturing, and infrastructure projects, reflecting a focused effort to stimulate internal economic momentum.
Approximately 1.3 trillion yuan of the bond proceeds will be allocated to two key categories: "major" and "new" programs. The "major" initiatives will finance large-scale infrastructure projects such as railways, airports, and farmland, bolstering China's long-term economic capacity. Meanwhile, the "new" initiatives include consumer-focused programs, such as subsidies for trading in outdated appliances and vehicles, as well as grants for industrial equipment upgrades.
"Such measures are vital for revitalizing household spending and equipping industries for future challenges," noted a senior economist at the National Development and Reform Commission (NDRC).
China's move to issue these bonds reflects a broader effort to stave off deflationary pressures. Recent data reveal shrinking consumer confidence, compounded by declining property values and limited social welfare programs. To mitigate these challenges, Beijing is also allocating over 1 trillion yuan toward advanced manufacturing sectors, including electric vehicles and green energy.
"The focus on innovation-driven industries indicates a shift towards sustainable and high-value economic growth," said Professor Liu Zhang of Peking University.
The planned issuance will constitute approximately 2.4% of China's 2023 GDP, signaling a significant fiscal expansion. However, it also raises concerns about rising national debt levels. State planners justify the move as necessary to maintain steady growth, a sentiment echoed during the recent Central Economic Work Conference.
Despite these efforts, uncertainties linger. A potential increase in U.S. tariffs, reaching up to 60%, threatens export-dependent industries, while domestic consumer demand remains subdued. Last week, officials announced plans to expand trade-in programs to cover more sectors, aiming to address these vulnerabilities.
