China is considering letting local governments sell $220 billion of bonds as part of a plan to accelerate infrastructure funding and help revive the country’s economy. Citing unnamed sources familiar with the matter, Bloomberg reported that the bond sales would be brought forward from 2023’s quota, marking the first time bonds are sold before start of the year.
With $283 billion sold last month, this year’s quota is mostly used up. Officials have been under pressure to step up issuance of local government special bonds. The debt would primarily be used to fund infrastructure, which Beijing hopes will help fill an estimated funding gap of $1 trillion.
The funding would add new support for infrastructure projects that have been announced over the past few weeks, as President Xi Jinping’s government tries to get the economy to achieve its annual growth target of around 5.5%.
Infrastructure investment in the country has been weak, having grown “just 0.4% last year even as special bond issuance hit 3.6 trillion yuan, similar to this year’s budget,” according to Reuters. “In December, Beijing also front-loaded nearly 1.5 trillion yuan of this year’s special bonds to spur development, but infrastructure investment growth just reached 6.7% in the following five months, missing rosier forecasts.”
The proposed Chinese stimulus package could be a major tailwind for the beleaguered country’s economy. More than half of the assets in EMQQ Global’s Emerging Markets Internet & Ecommerce ETF (NYSE Arca: EMQQ) are weighted toward China. By focusing on the internet and e-commerce in emerging markets, EMQQ looks to capture the growth and innovation happening in some of the largest and fastest-growing populations in the world.
“Sentiment around China has been negative for so long that severe pessimism has set in. But the reality is that we are starting to see real green shoots and catalysts emerge,” said Kevin T. Carter, founder and CIO of EMQQ Global.
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