Five Things to Know About China’s Unusual Sovereign Bond Issue

The Chinese government took a rare and unexpected decision in October to issue 1 trillion yuan ($141 billion) of additional sovereign bonds in the fourth quarter to finance infrastructure spending, widening the budget deficit as a percentage of GDP for 2023 to a record high of 3.8%.

The announcement, which surprised economists and investors, has fueled debate about whether this heralds a change in the leadership’s approach to fiscal policy. Some analysts say the move suggests top policymakers have accepted that larger annual budget deficits as a percentage of GDP will be needed in future, and that the central government will need to take a larger share of the fiscal spending burden to alleviate pressure on cash-strapped local authorities.