Chinese authorities have agreed to issue 3 trillion yuan ($411 billion) worth of special treasury bonds next year, two sources said, which would be the highest on record, as Beijing ramps up fiscal stimulus to revive a faltering economy.

The plan for 2025 sovereign debt issuance would be a sharp increase from this year’s 1 trillion yuan and comes as Beijing moves to soften the blow from an expected increase in US tariffs on Chinese imports when Donald Trump takes office in January.

The proceeds will be targeted at boosting consumption via subsidy programmes, equipment upgrades by businesses and funding investments in innovation-driven advanced sectors, among other initiatives, said the sources.

The sources, who have knowledge of the discussions, declined to be identified due to sensitivity of the matter.

The State Council Information Office, which handles media queries on behalf of the government, the finance ministry and the National Development and Reform Commission (NDRC), did not immediately respond to a Reuters request for comment.

China’s 10-year and 30-year treasury yields rose 1 basis point (bp) and 2 bps, respectively, after the news.

The planned special treasury bond issuance next year would be the largest on record and underscores Beijing’s willingness to go even deeper into debt to counter deflationary forces in the world’s second-largest economy.

The issuance “exceeded market expectations,” said Tommy Xie, head of Asia Macro research at OCBC Bank.

“Furthermore, as the central government is the only entity with meaningful capacity for additional leverage, any bond issuance at the central level is perceived as a positive development, likely providing incremental support for growth.”

China does not generally include ultra-long special bonds in annual budget plans, as it sees the instruments as an extraordinary measure to raise proceeds for specific projects or policy goals as needed.

As part of next year’s plan, about 1.3 trillion yuan to be raised through long-term special treasury bonds would fund “two major” and “two new” programmes, said the sources with knowledge of the matter.

The “new” initiatives consist of a subsidy programme for durable goods, allowing consumers to trade in old cars or appliances and buy new ones at a discount, and a separate one that subsidises large-scale equipment upgrades for businesses.

The “major” programmes refer to projects that implement national strategies such as construction of railways, airports and farmland and build security capacity in key areas, according to official documents.

The state planner NDRC said on Dec. 13 Beijing had fully allocated all proceeds from this year’s 1 trillion yuan in ultra-long special treasury bonds, with about 70% of proceeds financing the “two major” projects and the remainder going towards the “two new” schemes.

TARIFFS THREAT

Another big portion of the planned proceeds for next year would be for investments in “new productive forces”, Beijing’s shorthand for advanced manufacturing, such as electric vehicles, robotics, semiconductors and green energy, the sources said.

One of the sources said more than 1 trillion yuan would be earmarked for that initiative. The rest would go to recapitalise large state banks, said the sources, as top lenders struggle with shrinking margins, faltering profits and rising bad loans.

The issuance of new special treasury debt next year would equate to 2.4% of 2023 gross domestic product (GDP). Beijing raised 1.55 trillion yuan via such bonds in 2007, or 5.7% of economic output at that time.

President Xi Jinping gathered with top officials for the annual Central Economic Work Conference (CEWC) on Dec. 11 and 12 to chart the economic course for 2025.

A state media summary of the meeting said it was “necessary to maintain steady economic growth”, raise the fiscal deficit ratio and issue more government debt next year, but did not give specifics.

Last week Reuters reported, citing sources, that China plans to raise the budget deficit to a record 4% of GDP next year and maintain an economic growth target of bout 5%.

At the CEWC, Beijing sets targets for economic growth, the budget deficit, debt issuance and other areas in the year ahead.

Though usually agreed by top officials, such targets are not officially unveiled until an annual parliament meet in March and could still change before then.

China’s economy has struggled this year due to a severe property crisis, high local government debt and weak consumer demand. Exports, one of the few bright spots, could soon face US tariffs in excess of 60% if Trump delivers on campaign pledges.

While the risks to exports mean China will need to rely on domestic sources of growth, consumers are feeling less wealthy due to falling property prices and minimal social welfare. Weak household demand also poses a key risk.

Last week, officials said Beijing plans to expand the consumer goods and industrial equipment trade-in programmes.

The dollar defended its recent dominance on Tuesday in a holiday-lined week, as investors considered the prospect of higher-for-longer US interest rates, leaving other major currencies struggling near milestone lows.

The US dollar has leaped ahead over the past three months against a basket of currencies, fuelled by diverging central bank outlooks.

After its policy meeting on Wednesday, the U.S. Federal Reserve now looks set to hold rates higher for longer than markets had expected, elevating U.S. Treasury yields and sending the currency 1.2% up to two-year peaks.

Trading volumes are likely to thin out this week as the year-end approaches and major economic data releases are scarce, meaning the rates theme is likely to remain the main driver of moves in the foreign exchange market.

The dollar index held up firm on the day, 0.1% higher at 108.2, still hovering close to the two-year high of 108.54 it reached on Friday.
Other currencies took a breather on Tuesday, but the impact of the dollar’s recent rally was still felt across the board.

The euro was last bought at $1.0393, slightly lower on the day and not far from November’s two-year low, while sterling hovered around a one-month low at $1.2532.

Elsewhere, the yen was pinned near a five-month low and last stood at 157.04 per dollar, having already fallen close to 5% this month into territory that is keeping traders on alert for any intervention from Japanese authorities.

The Bank of Japan (BOJ) last week kept rates on hold and stayed vague on when it could next raise them. The central bank communication stood in stark contrast to the Federal Reserve’s hawkish tone a day earlier, when it projected a measured pace of rate cuts in 2025, sending the yen sliding.

“The shifts in Fed-BOJ policy divergence are now more likely to weaken the JPY,” said Vishnu Varathan, head of macro research for Asia ex-Japan at Mizuho Bank.

“JPY carry trades could, in defiance of a step-up in volatility or uncertainty, remain in play as two critical factors – supported ‘carry returns’ and mitigated capital risks of JPY squeeze – conspire favourably.”

Down Under, the Australian dollar eased 0.19% to $0.6237, while the New Zealand dollar dipped 0.16% to $0.5641.

The Reserve Bank of Australia (RBA) released the minutes of its December policy meeting on Tuesday, which signalled the central bank was closer to cutting interest rates, but needed the flow of economic news to support its confidence that inflation was slowing.

DOLLAR AHEAD

The greenback looked set to end the year more than 6% higher, after falling back last year.

While a benign U.S. inflation reading on Friday eased concerns about the pace of Fed cuts next year, markets are still pricing in just about 35 basis points worth of easing for 2025, in turn underpinning the dollar.

“Our base case is that the dollar will make some further headway next year as the U.S. continues to outperform, the interest rate gap between the U.S. and other G10 economies widens a little further, and the Trump administration brings in higher U.S. tariffs,” said Jonas Goltermann, deputy chief markets economist at Capital Economics.

Ahead of U.S. President-elect Donald Trump’s return to the White House in January, global central banks have urged caution over their rate paths due to uncertainty on how Trump’s planned tariffs, lower taxes and immigration curbs might affect policy.

Goldman Sachs said it was uncertain how tariffs could affect future Fed policy, adding that the inflation impact of price increases should fade after a year.

“The 2018-2019 trade war tightened financial conditions by enough to prompt an easing in Fed policy,” Goldman Sachs added.

“Much about the current cycle is different, but the 2018-2019 experience shows that the monetary policy risks from tariffs are at a minimum two-sided.”

Opponents of abortion are increasingly focusing on restricting access to pills, which are the most common way to end a pregnancy in the U.S.

This month, the Texas attorney general’s office filed a lawsuit against a New York doctor, saying she violated Texas law by prescribing abortion pills to a patient there via telemedicine. The suit represents the first lawsuit of its kind and could lead to a legal test for the New York law designed to protect providers there who prescribe the drugs to patients in states with abortion bans.

Anti-abortion officials are taking other steps, too, through legislation and lawsuits.

Abortion rights advocates are also concerned that President-elect Donald Trump’s administration could take action to restrict access if it chose to.

Pills are the most common means of abortion

By the time the U.S. Supreme Court overturned Roe v. Wade in 2022 and opened the door for states to ban abortion, over half of all abortions were obtained using medication, usually a combination of the drugs mifepristone and misoprostol.

The drugs are different than Plan B and other emergency contraceptives that are usually taken within three days after possible conception, weeks before women know they’re pregnant. Studies have found they’re generally safe and result in completed abortions more than 97% of the time, which is less effective than procedural abortions.