China may be planning to unleash a major public spending spree, with a leading Chinese economist saying that the country has room to ramp up fiscal support for the economy by issuing as much as $1.4 trillion (10 trillion yuan) in special debt.
The comment assumes added significance amidst rising expectations for Beijing to expand public spending as part of its stimulus package.
Jia Kang, a former head of a research institute affiliated with the Ministry of Finance, said authorities could lift confidence by drastically raising government investment in public projects, Bloomberg report.
Kang spoke in an interview with the Chinese publication The Paper.
“As these projects get underway, they will create jobs, increase income for citizens, and unlock consumption potential,” said Kang, who now leads the China Academy of New Supply-Side Economics, a private think tank.
Without giving a possible timeline, he said “scaling up the bond issuance now to 4 trillion or even 10 trillion yuan would not be excessive.”
The comments add to a growing discussion over what the Ministry of Finance will — or should — do to boost the world’s No. 2 economy after Beijing signalled its desire to draw a line under its growth slowdown.
The elite 24-man Politburo urged officials to issue ultra-long special sovereign bonds and local special notes to drive investment without giving specifics, fuelling speculation on the strength of the fiscal measures.
The debt issuance Kang suggested would be many multiples of the 1 trillion yuan in ultra-long special sovereign bonds the government planned to sell this year.
But he said that would be a proportional increase from the 4 trillion yuan stimulus package in 2008, given China’s gross domestic product had quadrupled in nominal terms by the end of 2023.
“Using public debt mechanisms properly won’t overburden the government,” he told The Paper.
“Long-term and ultra-long-term government bonds, with 30- to 50-year maturities, offer significant flexibility and are worth utilising, remaining within safe limits,” he said.
Reuters reported last week that China’s Ministry of Finance is planning to issue 2 trillion yuan of special sovereign bonds this year.
That funding will be evenly split between stimulating consumption and helping local governments tackle debt problems, the news agency said, citing unnamed sources.
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