As China's Stimulus Hype Wanes, Beijing Reportedly Weighs $850B Special Treasury Bonds To Stimulate Economy And Tackle Local Debt

China is reportedly considering issuing 6 trillion yuan, approximately $850 billion, in ultra-long special treasury bonds over the next three years. This potential move aims to bolster the nation’s slowing economy through fiscal stimulus.

What Happened: Sources indicate that the funds from these bonds will be partially used to help local governments manage their hidden debts. This speculation follows the Ministry of Finance’s announcement to address local government debt pressures, although specific figures were not disclosed during a recent press briefing, according to a report by Caixin Global on Tuesday.

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Xing Zhaopeng, a senior China strategist at ANZ, shared with Reuters that this development aligns with expectations. He stated, “For next year, we still think a growth target of around 5% is likely to be maintained. So, for a 5% growth rate, that should be enough.”

Why It Matters: The anticipation of China’s fiscal stimulus has been a significant factor influencing investor sentiment. Recently, U.S.-listed Chinese stocks experienced a downturn as investors were left underwhelmed by a high-level briefing from Chinese authorities that did not meet expectations for substantial economic measures. Despite hints of increased fiscal support, the absence of a large-scale package has left traders disappointed.

Stocks such as Alibaba Group Holding BABA, Baidu, Inc. BIDU, and JD.com, Inc. JD have seen declines of 6% to over 8% in the past five days. Similarly, Chinese electric vehicle stocks like NIO Inc NIO and XPeng Inc XPEV have also traded lower, with other EV stocks, including Li Auto Inc LI, losing over 3% to 11% in the same period.

Price Action: According to Benzinga Pro, at the time of writing on Tuesday during the after-hours, Invesco Golden Dragon China PGJ was showed a 2.13% decline while iShares MSCI China Multisector Tech ETF TCHI was up by 4.28%, Meanwhile, iShares China Large Cap ETF FXI was up by 0.27%, while iShares MSCI China ETF MCHI was down by 0.35%.

Read Next:

• China Was Tipping Into A Japan-Style ‘Lost Decade’ Of Deflation And Stagnation Before Late-September Stim

Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.

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