As part of the stimulus package to boost the economy after prolonged lockdown measures, China’s State Council ordered local authorities to release a special bond issuance of 3.45 trillion yuan (518 billion dollars).

According to Shanghai Securities News, in addition to investing in nine areas such as transportation infrastructure, energy, agriculture, forestry and water conservancy, municipal and industrial park infrastructure, major national strategic projects, and affordable housing projects in 2022, the special bonds will also focus on new infrastructure and new energy projects.

Davy Jun Huang, a U.S.–based economist, told the Chinese-language media Da Ji Yuan on June 3 that China’s progress in issuing new special bonds this year is significantly faster than last year. However, Huang questioned whether the money would be spent on proper projects that need the funds or invested in some unnecessary projects with debt problems.

In addition, how effectively the industry uses the fund is another issue. Huang provided an example when in 2021, China offered many favorable policies to the new energy sector, such as subsidies and tax incentives. Undoubtedly it helped the new energy industry attain substantial growth, but the results were ineffective similar to China’s chip manufacturing. 

Beijing set a 5.5% growth target for 2022. However, monetary tightening policy from the Federal Reserves, and China’s ineffective Covid measures against the omicron variant, raise skepticism among experts.

Chief economist for Greater China at Bank of America, Helen Qiao, told Bloomberg that China is now doing the impossible when it wants to achieve a growth target of 5.5% and maintain Zero Covid while reducing debt.

Qiao said, [quote] “In previous cycles, policymakers predictably came up with coordinated easing measures in monetary, property, and fiscal policies to boost investment growth. … This time around, China seems to have much more reservation against leverage buildup, along with concerns on oil-led inflation and Fed tightening. Arguably, a long list of easing measures have been rolled out so far, but with limited coordination and effectiveness.” [end quote]

According to Bloomberg, China plans to boost its growth by pumping about 5.3 trillion dollars into the economy this year. 

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