Fresh Fiscal Policy Support

Onshore China media reports flag that China may issue special sovereign bonds to boost the economic outlook. This comes after fresh fiscal stimulus measures were announced overnight following a meeting of China's State Council. The measures look targeted and are aimed at stabilized the economy.

• The China Sec Journal quoted onshore analysts as stating special bonds may need to be issued in H222 to maintain fiscal spending.
• A potential fiscal shortfall of 700bn-1.8 trillion yuan this year was also quoted as necessitating special sovereign bond issuance.
• This comes after the authorities also announced a host of fresh fiscal measures following a State Council meeting yesterday. Among the measures announced were tax credit rebates and fresh tax cuts of 140bn yuan, while passenger car taxes will be cut by 60bn yuan.
• The tax cuts represent a small percentage in terms of GDP (around 0.1% according to Bloomberg), but the State Council meeting stated the measures were designed to stabilize the economy.
• There was also discussion of new projects to be launched in infrastructure, particularly in water, transport and energy.
• Boosting loans to SMEs is also in focus, with the quota for loans to the sector to be doubled.