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The Ministry of Finance once again carried out targeted re-issuance operations for the special government bonds that had previously expired.

On August 19, the Ministry of Finance’s website published the “Notice on Matters Concerning the Issuance of Special Treasury Bonds (Phase I and Phase II) Due in 2024” (hereinafter referred to as the “Notice”), which plans to issue two phases of special treasury bonds totaling 400 billion yuan on August 29, and will be issued to relevant banks on a targeted basis. The People’s Bank of China will conduct open market operations for relevant banks.

The 400 billion yuan special government bonds are different from the 1 trillion yuan ultra-long-term special government bonds planned to be issued this year.

A relevant person in charge of the Ministry of Finance explained that in 2007, with the consent of the State Council and the approval of the Standing Committee of the National People's Congress, the Ministry of Finance issued 1.55 trillion yuan of special government bonds as the capital source of China Investment Corporation. The terms are mainly 10 years and 15 years, and they will mature one after another starting from 2017. When some of the above special government bonds mature in 2017 and 2022, the Ministry of Finance will issue special government bonds to relevant banks for repayment.

In 2017, the Ministry of Finance issued a total of 696.4 billion yuan of special treasury bonds to repay the principal that had matured previously. Among them, the 2017 special treasury bonds (first phase) issued on August 29 of that year had a face value of 400 billion yuan and a term of 7 years, which expired at the end of August this year.

"For the 400 billion yuan special government bonds that are about to expire on August 29, 2024, the Ministry of Finance will continue the practice of previous years and continue to adopt a rolling issuance method to issue special government bonds due in 2024 to relevant banks and other institutions. The funds raised will be used to repay the principal due that month." The above-mentioned person in charge said.

According to the above-mentioned "Notice", the first phase of the 400 billion yuan special treasury bonds issued this time is a 10-year fixed-rate interest-bearing bond with a par value of 300 billion yuan, and the second phase is a 15-year fixed-rate interest-bearing bond with a par value of 100 billion yuan.

The relevant person in charge of the Ministry of Finance stated that the issuance process of this special treasury bond does not involve social investors, and individual investors cannot purchase it. The special treasury bond due in 2024 is an equal rolling issuance of the original special treasury bond, which still corresponds to the original assets and liabilities and does not increase the fiscal deficit.

Affected by the economic downturn and other factors, the contradiction between fiscal revenue and expenditure has increased in recent years, and the above rolling renewal of special government bonds that have matured before has been adopted. For example, in December 2022, the Ministry of Finance issued 750 billion yuan of special government bonds, which are actually used to repay special government bonds issued in 2007 and matured at the end of 2022. In fact, it is borrowing new to repay old. This conventional operation is also in line with market expectations, will not increase liquidity, and has limited actual impact on the funding side.

It is worth noting that the 1.55 trillion yuan special treasury bonds issued in 2007 had maturities of 10 and 15 years, and the repayment period was extended by "borrowing new to repay old". The ultra-long-term special treasury bonds issued this year have maturities of 20, 30 and 50 years.

The Ministry of Finance issued 400 billion yuan of special government bonds to repay old debts, which does not involve increasing the fiscal deficit. However, as the pressure to stabilize growth in the second half of the year further increases, some experts are calling for an additional fiscal deficit.

Luo Zhiheng, chief economist of Guangdong Securities, once told China Business News that it is possible to study the issue of additional government bonds to offset the deficit and make up for the slow spending caused by the decline in land transfer income, and to increase counter-cyclical regulation. The additional government bonds can be re-loaned to some local governments with greater pressure to alleviate liquidity risks; some subsidies can be issued to unemployed college students and low-income urban and rural people to improve their risk resistance and consumption capacity; and they can be invested in major projects that are reserved in advance for the 15th Five-Year Plan.

Some experts also suggested that the state should clearly state that it plans to issue ultra-long-term special government bonds for several consecutive years starting this year, with 1 trillion yuan issued this year. Under the current situation, it is possible to consider increasing the issuance quota of ultra-long-term special government bonds this year to further increase the driving role of government investment. Ultra-long-term special government bonds are not included in the fiscal deficit.