China to issue record treasury bonds in 2022, guide rates lower

[SHANGHAI] China plans to sell a record amount of treasury bonds in 2022, while keeping overall interest rates of the issuance lower, as Beijing adopts a proactive policy to stabilise economic growth, a senior official at the finance ministry said.

China will provide liquidity support for treasury bond issuance, and will also attract more long-term foreign investors into the world's second-biggest bond market, Wang Xiaolong, director of the Treasury Department, Ministry of Finance, said during a meeting.

"Expansion and contraction of treasury bond issuance reflects the direction of macro policies," Wang said in the speech, which was reported on Wednesday (Dec 29) in China Bond, a magazine published by the China Central Depository & Clearing Co (CCDC).

China, which issued nearly 7 trillion yuan (S$1.49 trillion) of treasury bonds in 2021, faces multiple challenges, including the pandemic, global inflationary pressure, and uncertainty stemming from the US Federal Reserve's tapering, Wang said.

China's treasury bond issuance will hit a record high next year, as quite a large volume of bonds will mature, and the government continues to pursue a proactive fiscal policy.

The Ministry of Finance will coordinate with relevant government bodies to ensure there is ample market liquidity to guarantee smooth issuance, Wang said.

And as interest payment burdens from maturing bonds grow next year, China will moderately increase the proportion of short-term treasury bonds in its issuance in 2022 to guide the overall rates lower, he added.

In addition, China will reform the management of maturity dates for treasury bonds, so as to stabilise market expectations and help institutions better manage liquidity.

The government hopes treasury bond yields will play a bigger role as a benchmark for other types of borrowings.

Wang said China will encourage and guide more mid-to-long term foreign capital into China's bond market and hold Chinese debt for longer.

Foreign holdings in Chinese treasury bonds have been increasing for 11 consecutive quarters and now stand at 2.4 trillion yuan, or 11 per cent of the market, according to Wang.

REUTERS