BEIJING: China will allocate 300 billion yuan ($41.40 billion) in ultra-long treasury bonds to support a program of equipment upgrades and consumer goods trade-ins, the government said on Thursday, in the latest step to spur an economic recovery. About half the planned bond funds will be used for supporting consumer goods trade-ins, according to a notice issued by the National Development and Reform Commission (NDRC), the state planner, and the finance ministry.

China’s consumption faces “relatively big pressures” in the first half of this year, Xu Xingfeng, an official at consumption department of the commerce ministry, said at a media briefing.

“If we can stabilize the ‘four guardians’ of auto, home appliances, household products and catering, we can stabilize consumption,” Xu said. According to the notice China will raise subsidies for qualified buyers of new energy passenger cars to 15,000-20,000 yuan each. Buyers of some home appliances including televisions, air conditioners and computers will get subsidies equivalent to 15 percent-20 percent of their sales prices, but the subsidy for each item will not exceed 2,000 yuan.

“We believe this policy will play a positive role to drive up the consumption market in the second half of this year,” Zhao Chenxin, deputy head of the National Development and Reform Commission (NDRC), told the media briefing on Thursday. All of the 300 billion yuan will be disbursed by the end of August, Zhao said.

Retail sales, a gauge of consumption, grew only 2.0 percent in June, the weakest in 18 months, as residents become more cautious due to falling home prices, job insecurity and high debt.

That helped drag growth of the world’s second-largest economy to 4.7 percent in the second quarter from the 5.3 percent pace in the first three months, the weakest since the first quarter of 2023.

The government has set a growth target of around 5 percent for 2024. “Policymakers may allow some slowdown in the economy, but they could become worried if growth deviates too much from the target,” Hwabao Trust economist Nie Wen said. “The central government is giving the funds to cash-strapped local governments to enable them to subsidize consumers, which may help the trade-in scheme going forward.”

China will lower project application requirements for using ultra-long special sovereign bonds to support equipment upgrades of small and medium-sized firms, according to the notice.

Authorities will bar local governments from using the bond funds to repay local debt and balance local budgets, it said. The steps followed a pledge last week by China’s cabinet to increase support for the program which was aimed at spurring investment and consumption amid a shaky economic recovery.

China’s central bank on Thursday unexpectedly cut a medium-term interest rate by the most in more than four years, marking the latest move by authorities to boost economic growth. The world’s second-largest economy has encountered severe headwinds in recent years, as a heavily indebted property sector, sluggish consumption and high youth unemployment weigh on confidence.

Beijing has introduced a host of measures in recent months in a bid to get it humming again, but a full rebound has so far proven elusive. In a surprise move on Thursday morning, the People’s Bank of China slashed the rate for its medium-term lending facility (MLF) - the interest for one-year loans to financial institutions - to 2.3 percent, from 2.5 percent. The central bank typically makes MLF announcements on a predetermined day in the middle of the month. The last time the rate was cut was in August but the latest is the biggest since April 2020.

It comes after the PBoC cut two benchmark interest rates on Monday, as expected.

The country’s economy has failed to fully recover from the impact of tough anti-pandemic measures, which were lifted in late 2022. Chinese authorities have set an official growth target for this year of around five percent. But that is considered ambitious by many economists and it expanded just 4.7 percent on-year in the second quarter, data showed last week. Those figures came as Communist Party leaders, including President Xi Jinping, gathered for a meeting in Beijing, where they issued repeated calls to “eliminate risks” in the economy and boost domestic consumption. However, they have so far offered few concrete measures to revive growth. — Agencies