Fiscal Stimulus

Beijing is issuing its largest-ever 30-year government bond tranche as part of a record special bond program designed to fund infrastructure without inflating near-term money supply. The 30-year maturity signals confidence in long-term economic stability while pushing financing costs into the future. Chinese 10-year yields are trading at 1.62 percent, near historic lows, giving the government cheap funding for the stimulus package Xi announced in December.

Beijing has one powerful tool to boost consumer spending that it refuses to use: direct cash payments to households. While infrastructure spending and corporate tax cuts dominate stimulus packages, putting money directly into bank accounts would deliver immediate consumption gains but undermines the Communist Party's control over economic allocation. The political constraint explains why Chinese household consumption remains stuck at 38 percent of GDP versus 68 percent in the US.