Beijing: China announced on Saturday ( 12 October ) that it will” significantly increase” government debt issuance in order to provide subsidies to people with low incomes, boost the housing market, and raise money for state banks as it tries to revive sputtering economic growth.
Finance Minister Lan Foan stated at a press conference that there will be more” counter-cyclical methods” this time, without giving specifics about the size of the fiscal stimulus being prepared.
” There is still a significant amount of room for China to challenge debt,” Lan said.
Due to a sharp decline in the property market and sick consumer confidence, which have exposed the second-largest economy’s overreliance on exports in an increasingly uncomfortable international trade environment, the second-largest economy in the world is currently facing severe deflationary pressures.
A wide range of financial data in recent months has outperformed forecasts, raising questions for economists and investors about the government’s around 5 % growth target this year and potential longer-term fundamental slowdown.
Data for September, which will be released over the coming year, is expected to show more failure, but Zheng Shanjie, the president of the National Development and Reform Commission, China’s position manager, said he was “fully comfortable” that the goal will be met.
After a meeting of the Communist Party’s best leaders, the Politburo, in September, there was more and more debate about China’s fiscal stimulus steps, which have been the subject of intense debate in global financial markets.
Chinese stocks rose 25 % in the first two days following the meeting before slipping as tensions rose despite the lack of further information on the government’s additional spending plans.
China plans to issue specific sovereign bonds for about 2 trillion renminbi ( US$ 28 billion ) this year as part of new fiscal stimulus, according to a report from Reuters next month.
The other third would pay for the local governments ‘ debt relief, while the other half may pay for the purchase of home electronics and other items as well as pay for a monthly income of 800 yuan, or US$ 114, for each child, for all families with two or more children.
Separately, according to Bloomberg News, China is also considering putting up to 1 trillion yuan of money into its largest state lenders to expand their capacity to support the business, mainly by issuing new royal ties.
China’s legislature, which is scheduled to meet in the coming days, typically approves more debt issuance.