By Kevin Yao and Liangping Gao

BEIJING (Reuters) – China will sharply increase funding from ultra-long treasury bonds in 2025 to spur business investment and consumer-boosting initiatives, a state planner official said on Friday, as Beijing cranks up fiscal stimulus to revitalize the faltering economy.

Special treasury bonds will be used to fund large-scale equipment upgrades and consumer goods trade-ins, said Yuan Da, deputy secretary-general of the National Development and Reform Commission (NDRC) at a press conference.

> “The size of ultra-long special government bond funds will be sharply increased this year to intensify and expand the implementation of the two new initiatives,” Yuan said.

Under the program launched last year, consumers can trade in old cars or appliances and buy new ones at a discount, along with a separate initiative that subsidizes large-scale equipment upgrades for businesses.

Households will also be eligible for subsidies to buy three types of digital products this year, including cell phones, tablets, smartwatches, and bracelets, Yuan said.

In December, the NDRC stated that Beijing had fully allocated all proceeds from 1 trillion yuan ($136.68 billion) in ultra-long special treasury bonds in 2024, with about 70% of proceeds financing “two major projects” and the rest directed towards new initiatives.

Chinese leaders have pledged to “vigorously” boost consumption this year, raising expectations of more policy steps to spur demand and fight deflationary risks.

Millions of government workers across China received surprise wage increases this week, as stated by affected individuals, further reflecting Beijing’s efforts to enhance spending.

China will also increase funding from special treasury bonds and broaden the scope for another program focusing on supporting key strategic sectors, according to Zhao Chenxin, vice head of the state planner, at the press conference.

The government has approved projects for 2025 worth 100 billion yuan under this scheme in advance, he noted.

The major programs encompass projects like the construction of railways and airports, development of farmland, and building security capacity in key areas, according to official documents.

The world’s second-biggest economy has faced struggles over the past few years due to a severe property crisis, high local government debt, and weak consumer demand. Exports, one of the few bright spots, could face increased U.S. tariffs under a second Donald Trump administration.

Reuters reported that authorities have agreed to issue 3 trillion yuan worth of special treasury bonds in 2025, setting a record high.

STRONG FISCAL STIMULUS EXPECTED

China is likely to permit local governments to increase issuance of special bonds to 4.7 trillion yuan this year, up from 3.9 trillion yuan in 2024, as stated by Zhang Ming, a senior economist at the Chinese Academy of Social Sciences, a top state think tank.

The combined special treasury and local bonds along with the annual budget deficit could approach 13 trillion yuan this year, or 9-10% of gross domestic product, Zhang noted in an article published on the China Chief Economist Forum’s website.

> “Such a level of broad-based deficit would be rare in history,” Zhang added.

Reuters reported last month that Chinese leaders agreed to raise the budget deficit to 4% of GDP in 2025, the highest on record, while maintaining an economic growth target of around 5%.

NDRC’s Yuan expressed confidence, stating that China has ample policy space to support growth this year.

> “We are fully confident of driving continued economic recovery this year.”

China’s central bank is anticipated to cut its key policy rate from the current level of 1.5% “at an appropriate time” in 2025, according to the Financial Times, as part of Beijing’s efforts to stimulate growth.

($1 = 7.3166 Chinese yuan renminbi)