China's economy grew more than expected in the third quarter, but the reading was still below target and officials have continued to face calls for more stimulus.
The bonds unveiled Tuesday will be distributed to local governments to support national disaster prevention and recovery and will be issued in the fourth quarter of this year, state news agency Xinhua said.
Households are watching their spending amid sluggish growth, which has hurt consumption this year, though a week-long national holiday in October helped boost spending on tourism and other services.
But authorities are still on edge over turmoil in the real-estate sector, which has long accounted for a quarter of the country's gross domestic product, supports thousands of companies and is a major source of employment.
- 'Highly unusual' -
Zhang Zhiwei of Pinpoint Asset Management said the move was "highly unusual" and "came to the market as a surprise".
"I take this policy as another step in the right direction -- China should make its fiscal policy more supportive, given the deflationary pressure in the economy," he wrote in a note.
"Part of the funds raised will be utilized next year, hence this helps to boost growth outlook beyond Q4."
The 4.9 percent GDP expansion in July-September followed a series of broadly positive readings that point to a period of stability following months of weakness despite the lifting of strict zero-Covid measures.
While leaders have unveiled a series of targeted stimulus for various sectors -- particularly property -- pressure has been building on them to announce wider-ranging support.
"This is not the bazooka, but one of the most significant incremental moves so far," Societe Generale Cross Asset Research wrote in a note.
"The central government is recognizing that greater help is needed to sustain the nascent recovery momentum, and this task is too much a burden on local governments alone."
- 'Post-disaster recovery' -
Xinhua said Tuesday the funds were to address "post-disaster recovery and reconstruction, to make up for shortcomings in disaster prevention, reduction and relief, and to improve our country's ability to withstand natural disasters".
China has been hit by a series of extreme weather events this year, events that scientists say are being exacerbated by climate change.
The country has experienced record-breaking heatwaves and historic rainfall within a short timeframe.
Dozens of people were killed across northern China in August after the most severe rainfall since records began 140 years ago, and damage to property and crops was extensive.
"Since the beginning of this year, many parts of our country have suffered rainstorms, floods, typhoons and other disasters, and local governments have faced serious recovery and reconstruction tasks," Xinhua said Tuesday.
The agency said such events had been occurring more frequently, "increasing the requirements for our country's disaster prevention, reduction and relief capabilities".
The bond issuance is expected to increase the deficit rate from 3.0 percent to around 3.8 percent, Xinhua said.
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