China announced on Thursday that it will allocate 300 billion yuan ($41.40 billion) in ultra-long-term treasury bonds to support a programme of equipment upgrades and consumer goods trade-ins. This initiative is part of a broader effort to stimulate investment and consumption amid a sluggish economic recovery.
Allocation and Purpose
Out of the total allocation, 148 billion yuan will be dedicated to supporting equipment upgrades, as stated in a notice from the state planner and finance ministry. The government has mandated that local governments cannot use these bond funds to repay local debt or balance local budgets.
Government’s Commitment to Economic Recovery
This move follows a recent pledge by China’s cabinet to enhance support for the programme, which aims to boost investment and consumption. The initiative is particularly crucial as the country navigates a challenging economic landscape.
China plans to issue 1 trillion yuan of special treasury bonds this year. This significant financial effort is designed to revitalise key sectors of the economy that are struggling.
Support for Small and Medium-Sized Enterprises
The government will lower project application requirements for using ultra-long special sovereign bonds, making it easier for small and medium-sized firms to access funds for equipment upgrades. This step is intended to facilitate growth and modernization in these critical sectors.
Increased Subsidies for Consumer Goods Trade-Ins
In addition to supporting equipment upgrades, the programme will raise subsidies for car trade-ins, offering up to 20,000 yuan per vehicle. This measure is expected to encourage consumer spending and stimulate the automotive market.
With Inputs from Reuters
