China's bonds to 'help economic recovery'

BEIJING, Oct 25 (Reuters): China's new sovereign bonds will help bolster the economic recovery, China's vice finance minister Zhu Zhongming said on Wednesday, as the government's stepped-up fiscal stimulus sharply raises its budget deficit.

China's top parliament body has approved a 1 trillion yuan ($137 billion) in sovereign bond issuance to help rebuild areas hit by this year's floods and improve urban infrastructure to cope with future disasters, state media said on Tuesday.

"After the treasury bond funds are put into use, it will help drive domestic demand and further consolidate the recovery of the economy," Zhu said at a news conference.

The world's second-largest economy grew faster than expected in the third quarter, improving the chances that Beijing can meet its growth target of around 5 per cent for 2023. But economists say the crisis-hit property sector remains a drag on the economy and continues to cloud the growth outlook.

In a rare move, China sharply lifted its 2023 budget deficit to around 3.8 per cent of gross domestic product from an originally set 3 per cent due to the rise in central government debt, according to state media.

The proposed increase in bond issuance comes as Beijing prepares to inject a fresh dose of fiscal stimulus to shore up the economic recovery, policy insiders say.