China's Bold Fiscal Move: Debt Relief Sparks Economic Hope

China initiates a significant fiscal program easing debt repayment for local governments, signaling further stimulus to counteract weak demand and deflationary pressures. The government raises local debt quotas and aims to slash hidden debt by reallocating funds towards fiscal stability and growth.


Devdiscourse News Desk | Updated: 08-11-2024 15:19 IST | Created: 08-11-2024 15:01 IST
China's Bold Fiscal Move: Debt Relief Sparks Economic Hope
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China launched a new fiscal package on Friday, easing debt repayment for its local governments. With Finance Minister Lan Foan hinting at more stimulus measures, the government is set to let local entities allocate 10 trillion yuan towards reducing 'hidden' debt, a move crucial to addressing long-term economic outlook concerns exacerbated by U.S. political developments.

The debt quota for local governments will rise by 6 trillion yuan, complemented by 4 trillion in previously approved issuances, to manage debt swaps aimed at lessening financial risks. Recent deflationary pressures, weak domestic demand, and a property crisis have strained local governments' financial capabilities, curtailing new investments.

Approving higher ceilings for local government bonds, China's legislative body aims to mitigate systemic risks. Vice Chairman Xu Hongcai and Finance Minister Lan indicated support policies for state acquisitions of unsold apartments and land reclamation from developers, seeking to stabilize financial balance sheets rather than spur immediate growth.

(With inputs from agencies.)

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