Investors were hoping Lan would announce a fiscal stimulus package of up to 2 trillion yuan ($280 billion)
China’s finance minister on Saturday said the country will “significantly increase” debt issuance to counter slow economic growth, stabilize the property market, top up the capital of state banks, and offer help to poorer people.
The Chinese government is looking at additional ways to boost economic growth, Finance Minister Lan Fo’an said Saturday, but he did not announce details of the new fiscal stimulus plan that analysts were expecting. Investors were hoping Lan would announce a fiscal stimulus package of up to 2 trillion yuan ($280 billion).
“There are other policy tools that are being discussed that are still in the pipeline,” he said at a news conference, adding that “the central government still has quite large room to borrow and increase the deficit.”
China’s sovereign bonds were little changed after the announcement, Bloomberg reported. Stock markets are closed in China on Saturdays.
China’s economic growth has remained sluggish since the lifting of the COVID-19 pandemic restrictions in late 2022. Companies have cut back on hiring and a prolonged downturn in the property market has deflated consumer confidence, curbing spending.
The government has since raised pensions and offered subsidies to people who trade in old cars or appliances for new ones, but such steps have failed to spur economic growth. The Standing Committee of the National People’s Congress, the Communist Party-controlled parliament that oversees the government budget, approved additional sovereign debt and raise the budget deficit ratio to about 3.8% of gross domestic product.
Chinese stock markets rallied after the central bank and other government agencies announced steps at the end of September to revive the property sector and support financial markets. Chinese stocks SHCOMP -2.55% – 000300 – 2.77% – reached two-year highs, spiking 25% in the wake of the announcement before retreating given the absence of further policy details from officials. Global commodity markets from iron ore to industrial metals and oil have also been volatile on hopes stimulus will stoke sluggish Chinese demand.
The finance minister said on Saturday that the government would roll out a package of incremental measures to speed up implementation of its existing policies. They include increasing scholarships for students, issuing bonds to help major banks replenish their capital, and providing more support to highly indebted local governments, some of which have had to curtail public services.
“These policies are in the right direction,” Zhiwei Zhang, president and chief economist at Pinpoint Asset Management in Hong Kong, said in a note Saturday, CNBC reported. He added that more details are needed to evaluate the impact of such policies on the macroeconomic outlook, and “this will be the focus of the market in coming months.”
Reuters reported that China plans to issue special sovereign bonds worth about 2 trillion yuan ($284.43 billion) this year as part of fresh fiscal stimulus.
Data for September, which will be released over the coming week, is expected to show further weakness in the economy, but officials have expressed “full confidence” that the 2024 target will be met, Reuters reported.
— Associated Press contributed to this article.
