China's Investors Left Disappointed by Lack of Stimulus Announcement

China’s Ministry of Finance recently held a press conference but did not announce a broad-based fiscal stimulus package. Instead, the focus was on tackling local government debt and addressing challenges in the property market, both of which are seen as significant impediments to the country’s economic growth.

Despite the lack of strong measures, analysts still foresee some moderate stimulus actions. These may include raising the fiscal deficit ratio above the current 3 percent, increasing the issuance of ultra-long special treasury bonds, along with local government bonds, and implementing tax cuts.

During the one-hour conference, the Ministry detailed several adjustments intended to support localities and the financial system. These measures include elevating debt ceilings and utilizing funds from an unspent government bond quota, together with providing fiscal support for the property market and restoring capital for major state-owned banks.

Finance Minister Lan Foan announced that local governments in need of funds could potentially access a total of 2.3 trillion yuan (approximately US$325.3 billion) in special bond financing in the last quarter of the year. This provision aims to assist cash-strapped localities in managing their financial burdens.

Additionally, the central government plans to implement a one-time, significant increase in the debt ceiling to help local governments address hidden debts—a move the minister described as “the most powerful measure to support debt reduction introduced in recent years.” This measure is intended to ease the financial pressures on local governments and stabilize their fiscal situations.

Regarding the property sector, Deputy Finance Minister Liao Min mentioned that local governments would be permitted to use special bonds to purchase idle land and commercial properties from struggling developers. This initiative aims to rejuvenate the property market, which has been facing numerous challenges.

China, Investors, Stimulus