China’s finance minister has pledged to step up the use of fiscal tools to spur domestic demand and tackle local government debt, following stable growth and improved economic momentum in the first half of the year.
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Finance Minister Lan Foan said the central government would accelerate fiscal spending, including the issuance and use of ultra-long-term bonds and local government special-purpose bonds, in an article published on Wednesday in Study Times – a newspaper run by the Central Party School of the Communist Party of China.
Lan’s article echoed Wednesday’s meeting of the ruling party’s Politburo, a major decision-making body, which called for the thorough implementation of a “more proactive fiscal policy” and a “moderately loose” monetary policy to maximise their impact.
Beijing would “firmly curb the growth of new hidden debt and continuously urge local governments to comply with fiscal discipline and strengthen budgetary constraints”, Lan wrote, adding that authorities would guide local governments to carry out debt swaps to mitigate risks.
By the end of June, 1.8 trillion yuan (US$251 billion) of the 2 trillion yuan in debt-swap bonds allocated for 2025 had been issued, with 1.44 trillion yuan already used, the ministry said at a press conference last Friday.
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In the first six months of 2025, China issued 7.88 trillion yuan worth of government bonds – a record high that marked a 35.28 per cent year-on-year increase, according to official data.
The average interest rate on these bonds fell by 43 basis points year-on-year, dropping to 1.52 per cent.