China expected to announce highly anticipated fiscal stimulus package


Pictured here is a construction site of property developer Hongkong Land, in Shanghai on Nov. 4, 2024.

Feature China | Future Publishing | Getty Images

BEIJING – China is widely expected to unveil more stimulus on Friday after its parliament ends a five-day meeting.

Authorities here have ramped up stimulus announcements since late September, fueling a stock rally. President Xi Jinping led a meeting on Sept. 26 that called for strengthening fiscal and monetary support, and stopping the real estate market slump.

While the People’s Bank of China has already cut several interest rates, major increases in government debt and spending requires approval by the country’s parliament, called the National People’s Congress.

That approval could be granted at the weeklong meeting of the legislature’s standing committee. During a similar meeting in October of last year, authorities had approved a rare increase in China’s deficit to 3.8%, from 3%, according to state media.

Analysts expect an increase in the scale of fiscal support after Donald Trump — who has threatened harsh tariffs on Chinese goods — won the U.S. presidential election this week. But some are still cautious, warning that Beijing may remain conservative and not issue direct support to consumers.

When discussing planned fiscal support at a press conference last month, Minister of Finance Lan Fo’an emphasized the need to address local government debt problems.

Trump will restart the China trade wars with tariff policy, says Evercore ISI's Sarah Bianchi

At the parliamentary meeting so far, officials have reviewed a plan to increase the limit on how much debt local governments can issue, according to state media. The additional quota would go toward swapping out local governments’ hidden debt.

Nomura estimates that China has 50 trillion yuan to 60 trillion yuan ($7 trillion to $8.4 trillion) in such hidden debt, and expects Beijing could allow local authorities to increase deb issuance by 10 trillion yuan over the next few years.

That could save local governments 300 billion yuan in interest payments a year, Nomura said.

In recent years, the country’s real estate slump has drastically limited a significant source of local government revenues. Regional authorities have also had to spend on Covid-19 controls during the pandemic.

Even before then, local Chinese government debt had grown to 22% of GDP by the end of 2019, far more than the growth in revenue available to pay that debt, according to an International Monetary Fund report.



View Original Source Here

You May Also Like

FAA will keep ‘zero tolerance’ policy toward unruly passengers, outgoing chief says

FAA Administrator Steve Dickson prepares to testify during the Senate Commerce, Science…

Amazon extends temporary raise in pay through May 30

FILE PHOTO: The logo of Amazon is seen at the company logistics…

WWE agrees to merge with UFC to create a new company run by Ari Emanuel and Vince McMahon

In this article WWE EDR Follow your favorite stocksCREATE FREE ACCOUNT World…

Gap shares rise after retailer issues strong earnings guidance, despite weak revenue outlook

In this article GPS Sale signs are on display in the windows…