Beijing Unveils Fiscal Stimulus Package

BEIJING (Reuters) – China's finance ministry on Saturday unveiled a fiscal stimulus package aimed at reviving the flagging economy and achieving the government's growth target, though it did not disclose the size of the new measures.

The ministry stated at a press conference that it would "significantly" increase government debt issuance to provide subsidies to low-income households, support the property market, and replenish state banks' capital as part of efforts to jumpstart economic growth.

This much-anticipated briefing follows the central bank and other regulators' announcement in late September of aggressive monetary stimulus measures since COVID-19, which includes reviving the ailing property market through mortgage rate cuts.

Reuters previously reported that China plans to issue special sovereign bonds worth approximately 2 trillion yuan ($283.02 billion) this year as part of fresh fiscal stimulus.

Key Measures Announced by Finance Minister Lan Foan

• LOCAL DEBT RESOLUTION
  China will increase support for local governments to address hidden debt risks, enhancing their capacity to support the economy. The government has allocated 1.2 trillion yuan ($169.81 billion) in local bond quotas this year to help resolve existing hidden debts and settle government arrears to firms.
  China plans a large-scale debt swap program, alongside continued use of bond quotas for debt resolution, described as the "biggest" policy measure in recent years. Detailed policies will be announced after the necessary legal procedures are completed.

• BANK RECAPITALISATION
  China will expand the use of local government bond proceeds to support the property market and recapitalise large state-owned banks. Special treasury bonds will be issued to boost the core Tier-1 capital of major state-owned commercial banks, enhancing their capability to withstand risks and provide credit to the real economy.

• PROPERTY MARKET SUPPORT
  Local governments will be permitted to use special bonds to purchase unused land, improving their capacity to manage land supply and alleviating liquidity and debt pressures on both local governments and property developers.
  China will also assist with the purchase of existing commercial housing for affordable housing initiatives and continue funding affordable housing projects.

The government is exploring policies on value-added taxes linked to residential properties and is reviewing other tax policies to support the property market.

• SUPPORT FOR LOW-INCOME HOUSEHOLDS AND STUDENTS
  The government plans to increase support for low-income individuals and students to stimulate consumption. The number of national scholarships for undergraduates will be doubled from 60,000 to 120,000 annually, with the value of each scholarship rising from 8,000 yuan to 10,000 yuan per student per year.

Lan also remarked that the central government has a "relatively large room" to raise debt and increase the budget deficit, albeit without providing specifics.

China has set this year's budget deficit at 3% of GDP, down from a revised 3.8% last year. The issuance of 1 trillion yuan in special ultra-long treasury bonds this year is not included in the budget. Local governments are expected to issue 3.9 trillion yuan in special bonds in 2024, compared to 3.8 trillion yuan last year.

($1 = 7.0666 Chinese yuan renminbi)