China Should Issue Special Anti-Pandemic Bonds as in 2020, Experts Say
Chen Yikan
DATE:  May 20 2022
/ SOURCE:  Yicai
China Should Issue Special Anti-Pandemic Bonds as in 2020, Experts Say China Should Issue Special Anti-Pandemic Bonds as in 2020, Experts Say

(Yicai Global) May 20 -- China's central government should issue special government bonds again after the first wave of the Covid-19 pandemic in 2020 to help regions overcome impacts arising from the latest outbreaks, according to fiscal policy experts.

The finance ministry should issue special treasury bonds on a large scale, Zhang Ming, deputy director of a finance and banking institute under the Chinese Academy of Social Sciences, told Yicai Global. Fiscal policy is particularly key when market players lack demand, Zhang added.

China's anti-pandemic government bonds are unique financing instruments that are not included in the country's fiscal deficit but must comply with its limit set for national debt.

In 2020, the finance ministry issued a total of CNY1 trillion (USD149.7 billion) of special government bonds, a direct source of funding to regional governments, to support public health infrastructure construction and small companies' finances via rent reduction and subsidies.

The necessity to issue special government bonds is growing this year, and could be materialized in the third quarter, said Zhong Zhengsheng, chief economist of Ping An Securities.

The pandemic has affected regional governments' fiscal revenues and led to an increase in fiscal expenditures, said Zhong. This, along with the sluggish land transfer market and various tax rebates, restricts the government's ability to stimulate economic growth through fiscal policies, he added.

The tally of special government bonds should be CNY2 trillion this time, and the funds obtained could be used to invest in infrastructure projects, subsidize low-income groups, and support various anti-epidemic efforts, said Luo Zhiheng, chief economist at Yuekai Securities.

However, such instruments must be used wisely. "Special government bonds can only be used when the macroeconomy suffers from special, sudden, and severe impacts and when the usual fiscal policies cannot solve them,” said Feng Qiaobin, deputy secretary-general of the Society of Public Finance of China.

Special government bonds should not be deployed frequently, said Ji Fuxing, professor at the University of Chinese Academy of Social Sciences. Instead, conventional tools should be prioritized. For example, China's current government debt balance still has a lot of room to grow, said Ji. Some of the 2023 special government bond issuance quotas could also be used in advance this year if approved by China's top legislature, the National People’s Congress, the professor added.

The funding proceeds should mainly be spent on infrastructure and public health projects, Ji added.

Editors: Tang Shihua, Emmi Laine, Xiao Yi 



Follow Yicai Global on
Keywords:   Special Government Bond,Local Government Expenditure,Fiscal Policy,COVID-19,Pandemic Lockdown