(Reuters) -China is set to approve slightly more than 1 trillion yuan ($137 billion) in additional sovereign debt issuance on Tuesday as Beijing steps up its efforts to spur infrastructure spending and encourage economic growth, three sources told Reuters.
China’s top legislators, the standing committee of the National People’s Congress (NPC), are set to approve the extra debt issuance on the last day of a meeting which has run from Oct. 20 to Oct. 24, said the sources, who declined to be named due to confidentiality constraints.
Beijing is aiming to announce the plans as soon as late-Tuesday and begin issuing the debt, which is among the measures the Chinese government is taking to shore up the economy during down cycles, in November, two of the sources added.
In a sign that recent policy measures may be helping to bolster a tentative recovery, China’s economy grew at a faster-than-expected rate in the third quarter, while consumption and industrial activity in September also surprised on the upside.
The third-quarter expansion put the government’s annual growth target of around 5% for the world’s second-largest economy within reach, analysts said.
Two of the sources, said that nearly half of the proceeds to be raised from the additional bond issuance would be spent on water conservancy and flood prevention projects, while the rest would be mainly used for post-disaster reconstruction and high-standard farmland construction.
China, which has experienced an unusually wet summer this year with devastating flooding in its northern and northeastern provinces, has so far mainly relied on local government special bonds rather than sovereign debt to fund infrastructure needs.
This prompted China’s top leadership and central government to pledge in August to strengthen water conservancy and other infrastructure in the north of the country and to improve its ability to prevent and respond to floods and droughts.
The province of Hebei may spend two years on post-flood reconstruction, state media reported, after Typhoon Doksuri battered northern China in August, causing at least 29 deaths and 95.8 billion yuan of direct economic losses there alone.
China’s State Council Information Office, which handles media queries on behalf of the government, did not immediately respond to a request for comment. The NPC and the Ministry of Finance also did not respond.
The Chinese parliament is already due to approve this week a bill that will allow local governments to front load part of their 2024 bond quotas, according to state media.
Chinese authorities have so far avoided aggressive fiscal stimulus to bolster the economy, although a property crisis and other headwinds continue to pose risks.
Beijing has in recent weeks unveiled a raft of measures, including more public works spending, interest rate cuts, property easing and efforts to shore up the private sector, after China’s growth momentum dropped.
But its ability to spur growth has been hamstrung by fears over debt risks and a fragile yuan.
($1 = 7.3171 Chinese yuan renminbi)
(Reporting by Reuters staff; Editing by Alexander Smith)