China to Issue Record 3 Trillion Yuan in Special Treasury Bonds

Investing.com — China is set to issue 3 trillion yuan ($411 billion) in special treasury bonds next year, marking the largest issuance on record, as reported by Reuters on Tuesday, citing sources familiar with the matter.

This plan represents a significant increase from the 1 trillion yuan issued in 2024 and underscores Beijing's push for stronger fiscal stimulus to support an economy facing headwinds.

The move comes as Chinese officials prepare for the potential impact of higher U.S. tariffs under Donald Trump's incoming administration. The funds raised will focus on stimulating consumption through subsidy programs, supporting business equipment upgrades, and fostering innovation in advanced industries.

Following the announcement, yields on China's 10-Year and 30-Year treasury bonds edged up by 1.7 and 2.1 basis points, respectively.

The planned issuance in 2025 will mark the largest on record, highlighting Beijing's readiness to increase debt to counter deflationary pressures and maintain economic momentum.

Tommy Xie, head of Asia Macro research at OCBC Bank, noted that the issuance "exceeded market expectations" and emphasized the central government's capacity to take on additional debt positively, expecting it to provide further economic support.

China typically reserves special treasury bonds for targeted policy objectives, bypassing standard budget plans. These instruments are considered tools for extraordinary circumstances, allowing the government to secure funding for specific projects.

Out of the total issuance planned for 2025, approximately 1.3 trillion yuan will be allocated to finance “two major” and “two new” initiatives, according to sources.

The "new" programs include subsidies for consumers to replace old cars and appliances, alongside incentives for businesses to upgrade large-scale equipment. The "major" projects will concentrate on infrastructure development, including railways, airports, and farmland, while also enhancing national security capabilities.

A significant portion of the 3 trillion yuan special treasury bond issuance will be directed toward investments in "new productive forces," a term used by Beijing for advanced manufacturing sectors like electric vehicles, robotics, semiconductors, and green energy. Reports suggest over 1 trillion yuan will be allocated to this initiative, with the remaining funds aimed at recapitalizing major state-owned banks facing narrowing margins, declining profits, and rising bad debt.

The planned bond issuance represents approximately 2.4% of China's 2023 GDP. For comparison, Beijing raised 1.55 trillion yuan in special bonds in 2007, which was equivalent to 5.7% of the country’s economic output at the time.