By The Financial District
Dec 16, 20231 min
Chinese leaders agreed at an annual meeting on the economy this week to run a budget deficit of 3% of gross domestic product (GDP) in 2024, three sources with knowledge of the matter said, while other fiscal support may be covered by off-budget debt, Reuters reported.
The option to issue off-budget sovereign debt gives it the flexibility to step up stimulus to maintain stable economic growth.
While the deficit figure is lower than this year's revised 3.8% target, suggesting Beijing wants to maintain fiscal discipline and is not considering a big fiscal bazooka next year, the option to issue off-budget sovereign debt gives it flexibility to step up stimulus to maintain stable economic growth.
Two of the sources told Reuters that special sovereign bonds could be issued to pay for extra expenditures as needed. One of them said they could amount to 1 trillion yuan ($140.16 billion).
China has issued special treasury bonds before. In 2020, it sold 1 trillion yuan in such debt to fund COVID-related measures. In 2007 it issued 1.55 trillion yuan to capitalize on its sovereign wealth fund. In 1998, it issued 270 billion yuan to recapitalize state banks.
China does not include special bonds in its annual budget plans, as it sees the instrument as an extraordinary measure to raise proceeds for specific projects or policy goals in times of need.