China could raise $846 billion to boost growth, Caixin reports

(Bloomberg) — China could raise 6 trillion yuan ($846 billion) of extra-long government bonds over three years to boost its sputtering economy, Chinese media outlet Caixin reported.

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The funds would be used in part to help local governments relieve off-balance sheet debt, the report said late Monday, citing unidentified people.

Investors and analysts are speculating about how much the Chinese government will borrow to finance an economic stimulus package. Finance Minister Lan Fo’an suggested the central government had room to increase leverage on Saturday, but did not provide a headline dollar figure that markets had been looking for.

Increasing government spending remains key to sustaining the recovery sparked by the central bank’s stimulus packages at the end of September. Traders are betting that the Standing Committee of the National People’s Congress, China’s top legislature, will approve additional budget funding when it meets later this month.

At Saturday’s briefing, Lan said there would be a one-time effort to replace local governments’ hidden debts or off-balance sheet loans of companies they control. The program will be the “biggest in recent years,” he said, without providing further details.

The measure could be crucial to resolving risks related to local government financing instruments, which the International Monetary Fund estimated last year contained over 60 trillion yuan of debt. Such loans are expensive to service and place additional strain on municipal finances given declining income from property sales and taxes.

– With support from Yujing Liu.

(Updates with more context)

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