China will start selling the first batch of 1 trillion yuan ($138 billion) of ultra-long term private government bonds on Friday to help revive the economy.
The central government will begin such sales this year by issuing 30-year bonds, according to a statement from the Ministry of Finance. According to Bloomberg, this ends months of speculation about when the bonds, only the fourth of their kind in 26 years, will be launched after a sweeping plan was announced in March.
According to the report, President Xi Jinping’s government is stepping up financial support to help an economy under pressure from the housing crisis and weak consumer confidence. Government spending on infrastructure, which can be financed through bonds, will play a key role in helping China achieve its annual growth target of around 5 per cent, above economists’ forecasts.
Australia & New Zealand Banking Group’s Xing Zhaopeng said the increase in gross domestic product could be as much as 1 percentage point.
“The timing of the bond issue is likely aimed at offsetting the impact of protectionist tariffs the US has threatened to impose on Chinese goods,” Zhaopeng said, noting the uncertainty ahead of a Communist Party meeting on reforms in July.
The 20-year and 50-year bonds will be sold on 24 May and 14 June respectively. Bond auctions will continue until the last batch of 30-year bonds goes on sale in November. The ministry did not disclose the amount of bonds to be sold.
Bloomberg announced the private government bond sale on Monday. The issue will include 300 billion yuan of 20-year bonds, 600 billion yuan of 30-year bonds and 100 billion yuan of 50-year bonds, according to people familiar with the matter, who requested anonymity because the information is private.
