Recently, the Chinese Ministry of Finance announced that they will issue ultra-long-term special national bonds in 2026. During last year’s two sessions, the Chinese Communist Party (CCP) disclosed their plan to issue these bonds continuously for several years starting from 2024. Chinese expert on China-related matters, Wang He, previously pointed out in an article that without reforms in the financial and tax system, structural adjustments in the economy, and improvement in the international economic environment, issuing ultra-long-term special national bonds is merely a temporary solution to a deep-rooted problem.
On December 11th, the Central Economic Work Conference of the CCP concluded. Finance Minister Lan Foan chaired a party group meeting on the 12th to discuss the implementation of financial department work.
The meeting emphasized the importance of grasping the overall requirements and policy orientation for next year’s economic work, maintaining necessary fiscal deficits, total debt levels, and overall expenditure, utilizing various types of government bond funds effectively, issuing ultra-long-term special national bonds, and continuously supporting the construction of “two major” projects (implementation of major national strategies and enhancement of security capabilities in key areas) and “two new” projects (large-scale equipment upgrades and replacement of old consumer goods).
On March 5th last year, Chinese Premier Li Keqiang announced in the government work report that starting from 2024, a series of ultra-long-term special national bonds will be issued continuously to address funding issues for major projects in the construction of a strong nation and national rejuvenation.
At the time, Sun Guoxiang, an associate professor in the Department of International Affairs and Business at Nanhua University in Taiwan, commented, “This also implies that originally, the mainland (construction of major national strategies and enhancement of security capabilities) could be supported by general national bonds or the regular national budget, but now it lacks the capacity to support. This indicates that the Chinese economy has not recovered as expected and is deteriorating.”
Subsequently, Wang He analyzed in an article that simply increasing the leverage of the central government through issuing large amounts of national bonds is just shifting debts around, with limited effectiveness in addressing China’s economic challenges. Without a “new round of reforms in the financial and tax system,” accompanying structural adjustments in the economy, and an improvement in the international economic environment, the CCP’s issuance of ultra-long-term special national bonds can only be considered a temporary solution to a long-standing problem.
Earlier, Xu Zhen, a senior figure in China’s capital markets, told Dajiyuan that the CCP implements similar stimulating policies annually, but their impact on the economy is minimal. “Except for a few industries like semiconductors, most industries are facing overcapacity. If you ask small and medium-sized enterprise owners to expand capacity again, as a rational business owner, the likelihood is very low.”
Xu Zhen mentioned that in the current economic downturn, consumption is down, and people’s attitudes towards spending are changing significantly. Young people who previously had no concept of frugality and hardships have had to reduce expenditures due to pandemic lockdowns, ongoing economic decline, and job losses. The phenomenon of “lying flat” reflects people’s lack of confidence in the future, in the society, and even in the government, posing a crisis for the CCP regime.