Pre-holiday red envelope, the policy finally has some substance

As I've always said, only by taking on more debt can we eliminate debt

According to Reuters, on September 26, two informed sources stated that as part of a new round of fiscal stimulus measures, China plans to issue approximately 2 trillion yuan (284.43 billion USD) in special sovereign bonds this year. This move will further strengthen efforts to address deflationary pressures and slowing economic growth.

Sources said that as part of this plan, the Ministry of Finance intends to issue 1 trillion yuan in special sovereign bonds, primarily to stimulate consumption and address concerns about the faltering post-pandemic economic recovery.

Some of the funds raised from the Ministry of Finance's special bonds will be used to increase subsidies for consumer goods trade-ins and upgrades of large commercial equipment.

The first source mentioned that the proceeds will also be used to provide an allowance of about 800 yuan (approximately 114 USD) per child per month to all families with two or more children.

Sources also added that China plans to raise an additional 1 trillion yuan through separate special sovereign bond issuances, with the proceeds intended to help local governments resolve debt issues.

Reuters noted that most of China's fiscal stimulus is still directed toward investments, but returns are diminishing, and these expenditures have left local governments saddled with 13 trillion USD in debt. Chinese household spending accounts for less than 40% of GDP, about 20 percentage points below the global average.

Sources indicated that some fiscal support measures could be announced as early as this week. As they were not authorized to speak to the media, the sources declined to be named.

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