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Chinese policymakers are weighing the issuance of at least 1 trillion yuan (HK$1.07 trillion) of additional sovereign debt for spending on infrastructure such as water conservancy projects, to help the economy meet the official growth target, according to people familiar with the matter.

That could raise this year's budget deficit to well above the 3 percent cap set in March, one of the people said. An announcement may come as early as this month, another person said, though deliberations are ongoing and the plans could change.

This action would mark a shift in Beijing's stance as the government has so far avoided broader fiscal stimulus despite a deepening property crisis and rising deflationary pressure that have put the growth goal of around 5 percent for the year at risk.

China has long been trying to keep its official fiscal deficit - which excludes special bonds or debt borrowed by local government financing vehicles - under 3 percent of gross domestic product partly to control financial risks.

But calls to loosen the limit by state-linked think tanks and economists at global firms have grown louder in recent years as fiscal stress built up in a slowing economy.

The plans, led by the Ministry of Finance and the National Development and Reform Commission, are subject to final approval by the State Council and legislators, the people added. The MOF and the NDRC didn't immediately reply to faxes seeking comments.

Water conservation will be a major focus. Reuters

China to raise 1tn yuan for infrastructure