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A prominent economist from a leading Chinese university has suggested that the government should introduce “new urbanization special treasury bonds” to directly allocate funds to county-level authorities. The goal would be to improve infrastructure, expand public services, and promote the integration of permanent residents into urban areas.
The expert, who oversees the Academic Center for Chinese Economic Practice and Thinking, shared this proposal at a recent conference on urban development. He previously served on the Monetary Policy Committee of the national central bank from 2010 to 2012.
He emphasized that a key focus of the nation’s 15th Five-Year Plan (2026-2030) is to boost domestic demand and rejuvenate economic growth. He believes that these initiatives will also help stabilize employment and income prospects. In this context, urbanization is seen as a vital factor for stimulating demand across the country.
The economist also noted that local governments, especially at the county level, face significant challenges in increasing investments in urbanization, household registration reforms, and public services because of substantial debt obligations. Utilizing treasury bonds effectively as a modern financial mechanism could help lower-tier governments avoid these constraints.
He proposed that, based on careful evaluation of the central government’s financial health and credit capacity, additional special treasury bonds should be issued to replace some existing local government debts, easing their fiscal burden.
Once financial pressures are eased, he suggested that urbanization targets be broken down into clear, measurable objectives tied to performance evaluations. Incorporating these metrics into official assessments could motivate county governments to enhance public services and fulfill development goals.
Historically, special treasury bonds were first issued during the 1998 Asian financial crisis to help state-owned banks replenish capital. In 2007, such bonds were used to purchase foreign exchange reserves from the central bank, which in turn funded the country’s sovereign wealth fund.
This year, the total issuance of special treasury bonds has exceeded 1.3 trillion yuan (about 182 billion US dollars). Since 2020, the issuance frequency has increased, with funds directed toward pandemic relief, disaster recovery, infrastructure projects, enterprise upgrades, and trade-in programs for consumer goods.
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