China's Bold Fiscal Moves: Tackling Debt and Stimulus
China has launched a new fiscal support package aimed at easing local government debt and potential deflationary pressures. The plan involves allowing local governments to allocate 10 trillion yuan for reducing off-balance sheet debt. The move aims to address economic challenges without directly boosting GDP.
China has unveiled a significant fiscal package designed to help its lagging economy, kicking off a series of measures intended to ease the debt repayment pressures shouldered by local governments. Finance Minister Lan Foan has hinted at further stimulus measures as the world's second-largest economy grapples with deflationary pressure, weak demand, and a property market crisis.
The central government has permitted local governments to allocate 10 trillion yuan towards reducing off-balance sheet debt, a step agreed upon after recent parliamentary discussions. Yet, no substantial measures to boost consumer demand were disclosed, despite investor expectations. Additionally, the debt quota for local governments will be increased by 6 trillion yuan.
The standing committee of the National People's Congress has sanctioned an increase in the special bonds issuance ceiling from 29.52 trillion to 35.52 trillion yuan. This initiative aims to alleviate systemic financial risks without directly stimulating GDP growth. The financial strains left unchecked could hinder economic recovery despite these debt management efforts.
(With inputs from agencies.)
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