China is soon to complete its one trillion yuan special issuance of central government bonds by the end of July. The financial aid is a part of the Chinese government's efforts in mitigating an economic fallout of businesses experienced during the pandemic.
The approval of an added one trillion yuan budget for government bonds by the end of July would ensure the sufficient liquidity and stability of China's financial sector. The first two batches of special treasuries offered during the pandemic totalled 100 billion yuan. These would be provided for bidding this coming Thursday.
The first batch would mature within five years, while the remaining additional bonds would mature within seven years since its issuance. The Ministry of Finance gave notice last Monday that coupon rates and underwriters of the two batches would be announced around the bidding date. It was also revealed that special treasuries would be traded by June 23, 2020.
The preparatory meeting conducted for the issuance was announced last Thursday by the attendees. All the special treasuries would be publicly issued and would be raised by the end of July. Furthermore, China's mainland would repay all interest payments and set aside a 300 billion yuan budget of the principal. On the other hand, the balance of 700 billion yuan would be paid to the local governments.
A report published on the China Securities Journal last Tuesday claimed that individual investors might also be allowed to purchase the special treasuries. The acquisition would be under the condition that they open an account and trade through the account exchange system or at the underwriters.
Last May, China's budget reports were approved by the legislature. The reports revealed that the budget would be used for local public health, infrastructure projects, and epidemic responses. Some of the funds would also be reserved for local governments at the primary level on financing difficulties.
According to the budget report, the Chinese government would improve the coordination and alignment of pandemic bonds and other fiscal funds. The local authorities would be given broader decision-making power over the use of these funds.
A senior official with the Ministry of Finance announced last week that the government instrumentality would establish a new transfer payment system for the provincial-level governments. This would allow the transfer of funds to lower-level governments. Additionally, a new supervisory system would also be created to prevent instances of embezzlement.
