China considers $850B bonds to boost economy, address debts

China may issue 6 trillion yuan (about $850 billion) in long-term treasury bonds over the next three years to support its slowing economy.

What Happened: Reports suggest that some of the funds from these bonds will assist local governments with their hidden debts. This comes after the Ministry of Finance mentioned plans to tackle debt issues, although no specific amounts were shared during a recent press briefing, according to Caixin Global.

Xing Zhaopeng, a strategist at ANZ, told Reuters that this aligns with growth expectations. He believes a growth target of around 5% next year is possible and should be sufficient.

Why It Matters: The anticipated fiscal stimulus from China has been affecting investor sentiment. Recently, U.S.-listed Chinese stocks fell after investors were disappointed by a briefing that didn’t outline major economic measures. Even though there were signals of increased fiscal support, the lack of a substantial package has discouraged traders.

Stocks such as Alibaba BABA, Baidu BIDU, and JD.com JD dropped between 6% and over 8% over the past week. Similarly, electric vehicle companies like NIO NIO and XPeng XPEV also saw declines, with others like Li Auto LI down between 3% and 11%.

Price Action: As of Tuesday during after-hours trading, the Invesco Golden Dragon China PGJ fell 2.13%, while the iShares MSCI China Multisector Tech ETF TCHI increased by 4.28%. The iShares China Large Cap ETF FXI went up by 0.27%, while the iShares MSCI China ETF MCHI decreased by 0.35%.

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Disclaimer: This content was partially produced with the help of Benzinga Neuro and reviewed by Benzinga editors.

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