Market unsatisfied with Beijing’s 6 trillion yuan stimulus

The Chinese Ministry of Finance is expected to issue 6 trillion yuan (US$843 billion) of ultra-long special treasury bonds in the coming three years to ease the local government debt crisis and stimulate the economy.

The issuance of ultra-long special treasury bonds, which have maturities of more than 10 years, is a part of China’s efforts to boost its economy through fiscal stimulus, Caixin reported on Monday, citing several unnamed sources.

After the People’s Bank of China (PBoC) and financial regulators on September 24 unveiled interest rate and reserve requirement ratio (RRR) cuts and vowed to stop home prices from falling, stock investors had been speculating about the size of the government’s potential stimulus package.

Liu Shijin, a top economist and the former deputy president of the China State Council’s Development Research Center, said in the 5th China Macroeconomy Forum on September 21 that the central government should raise 10 trillion yuan by issuing ultra-long special treasury bonds within one to two years.

He said the central government should use the proceeds from bond issuance to buy up unsold homes from the markets in the short run and accelerate urbanization over the medium term.

Liu’s comments had contributed to the recent stock market rally in mainland China and Hong Kong.

Since September 24, both the Shanghai Composite Index and the Hang Seng Index had gained 27% until they peaked on October 8 and 7, respectively.

Over the past week, many stock investors have been reducing their holdings due to the perceived under-delivery of China’s economic stimulus package.

The Shanghai Composite Index has declined 8.5% from its peak of 3,498 on October 8 to 3,201 on Tuesday. The Hang Seng Index has lost