China has kicked off a new round of fiscal support for its struggling economy, with a package to ease debt repayment woes for local governments, while Finance Minister Lan Foan signals more stimulus measures are on the way, reports Reuters.
China's top legislative body, the Standing Committee of theNational People's Assembly (NPA), approved a bill for increase local government debt limits during a meeting that began on Nov. 4 and ended today, a senior official said. Xu Hongcai, vice chairman of the NPC's financial and economic affairs committee, added at a press conference in Beijing that the debt swaps are aimed at resolving the local debt risks.
The world's second-largest economy has been on a rocky path over the past year, facing strong deflationary pressures from weak question, to real estate crisis and the growing difficulties financial for local governmentsConcerns about the long-term outlook were compounded by the electoral victory of Donald Trump in the United States, which threatened tariffs of more than 60% on all Chinese products.
China, here's what I'll do Beijing
Beijing will allow local governments to allocate 10 trillion yuan ($1,40 trillion) to reduce the off-balance sheet debts, or “hidden,” officials said today after the week-long meeting, without revealing any measures to stimulate the weak consumer demand, as many investors had hoped.
The bill raised the maximum amount allowed for local governments to issue special bonds from 29,52 trillion yuan to 35,52 trillion yuan. “I don’t see anything that exceeds expectations,” said Huang Xuefeng, director of research at Shanghai Anfang Private Fund Co, in Shanghai.
“It’s not huge when you consider the fiscal deficits due to the economic slowdown and the collapse of land sales. The money is being used to replace hidden debts, which means it doesn’t create new job flows, so the support for GDP growth is not as direct.”
China's Attempts to Support the Economy
From the end of September the authorities have significantly stepped up the economic stimulus measures, including i interest rate cuts, to help revive the economy and ensure that growth reaches the government's target of around 5% this year. China is also trying to cope with the side effects of thehuge debt accumulated following the previous economic stimulus that occurred after the global crisis of 2008 and 2009.
This includes the accumulated hidden debt mainly from funding from the Local societies for projects infrastructural that the authorities consider essential for development. However, this excessive debt leaves them little room to finance new projects to revive struggling economic activity.
At the same press conference, Finance Minister Lan Foan said that local governments' “hidden debt” amounted to 14,3 trillion yuan at the end of 2023, and that authorities planned to reduce it to 2,3 trillion yuan by 2028.
Mattarella to Xi Jinping: what he said
In the world there are “great changes, intense, profound and fast”. To face them together we need a climate of “"concordia" which unfortunately does not exist today. For this reason too it is "important that there are bilateral relations" and, for Italy, China is "a fundamental protagonist", said the President of the Republic, Sergio Mattarella, who met Chinese President Xi Jinping in Beijing today. “His visit is an opportunity to inject more dynamic energy into bilateral relations, for a new starting point. Differences must be resolved through dialogue to achieve harmonious coexistence,” Xi responded.
