China plans to issue bonds to boost economy

Shanghai, August 5

China is aiming to issue one trillion yuan ($164 billion) worth of bonds to fund construction projects to help boost the slowing economy, Bloomberg News reported, quoting unnamed sources.

Two policy banks which lend on government directives, China Development Bank and the Agricultural Development Bank of China, will issue bonds, it said, adding the Postal Savings Bank of China would be the buyer, the report said.

“We believe the government is preparing a large fiscal stimulus package, without which the economy could be heading for a hard landing worse than that experienced in 2008,” Shen Jianguang, chief Asia economist at Mizuho Securities Asia in Hong Kong, was quoted by Bloomberg as saying in its report on Tuesday.

In 2008, China launched a four trillion yuan (now $656 billion) stimulus package to stave off the impact of the global financial crisis, a move widely credited with keeping the economy on track but also causing a risky build-up in local government debt.

China’s economy, a key driver of global growth, expanded 7.4 per cent last year, its weakest since 1990, and has slowed further this year, growing seven per cent in each of the first two quarters. The government has targeted annual economic growth of around seven per cent for all of 2015.

China’s central bank in June announced its latest cut in interest rates, marking the fourth such move since November to boost lending.