The Chinese government is issuing hundreds of billions of dollars worth of new bonds to prop up the economy.

According to the Ministry of Finance, China will auction off 1 trillion yuan ($138 billion) of “ultra-long” bonds beginning on May 17. It will be the first of several sales to be held throughout the year.

The initial batch will comprise 30-year bonds, followed by 20-year and 50-year bonds in the subsequent weeks.

In a recent report, Chinese Premier Li Qiang said the proceeds from the bond sales will support mega projects in key sectors.

To the surprise of many economists, Li also announced that the government would target a GDP growth rate of 5% this year.

Although an ambitious target in the context of other developed economies, it's a further slowdown from China’s 5.2% growth rate in 2023.

The "mega" bond sale comes in the midst of a profound economic slowdown in China—thanks to a collapsing housing market, mounting debt, and declining consumer spending.

Economists warn things will get a lot worse before they get better.

The only direction is down

Many economists expected China’s economy to mount a swift comeback in 2023, paving the way for a stronger rebound in 2024.

That didn't happen due to a lingering real estate crisis and the end of Covid recovery momentum, experts say.

According to China Beige Book International, an independent research house, “The recovery from Covid—disappointing as it was—is over.”

The firm says it's only a “major global upside surprise or more active government policy” that can revive the Chinese economy.

Not only that, China’s largest banks have reported immense exposure to real estate—raising the rise of a Chinese “Lehman moment.”

Meanwhile, there's speculation that the Chinese government is hiding an emerging crisis in the private sector by instructing companies not to default on their loans.

According to S&P Global Ratings, this directive is “creating distorted incentives in the economy.”

Is 5% GDP growth feasible in the face of all domestic risks? Experts beg to differ.

“The 2024 challenge for the Chinese economy will not be GDP growth—that will likely be above 4.5%. The challenge will be that the only direction from there is down,” said Derek Scissors, a senior fellow at the American Enterprise Institute.

Scissors said the second half of the 2020s will be marked by “slowing growth” for China as it enters a painful transition period.

The International Monetary Fund agrees, having recently downgraded China’s GDP growth to a mere 3.5% by 2028.