China expected to announce much-anticipated fiscal stimulus package | Wilnesh News

BEIJING – China is widely expected to roll out more stimulus measures on Friday when the National People’s Congress concludes a five-day session.

Since late September, authorities have stepped up stimulus efforts, driving stocks higher. On September 26, President Xi Jinping presided over a meeting and called for strengthening fiscal and monetary support to curb the downturn in the real estate market.

While the People’s Bank of China has cut interest rates several times, significant increases in government debt and spending require approval from the National People’s Congress.

The approval is likely to come during a week-long meeting of the Legislature’s Standing Committee. At a similar meeting last October, authorities gave a rare approval to increase China’s deficit from 3% to 3.8%, according to state media reports.

Expectations for the scale of fiscal support have grown after Donald Trump, who threatened tough tariffs on Chinese goods, won the U.S. presidential election this week. But some analysts remain cautious, warning Beijing may remain conservative and not provide direct support to consumers.

Finance Minister Lanfouan emphasized the need to address local government debt issues when discussing the fiscal support plan at a press conference last month.

At parliamentary meetings so far, officials have reviewed a plan to increase local government debt limits, state media reported. The additional quota will be used to replace the implicit debt of local governments.

Nomura estimates that China has 50 trillion yuan to 60 trillion yuan ($7 trillion to $8.4 trillion) of such hidden debt, and predicts that Beijing may allow local authorities to increase debt issuance by 10 trillion yuan in the next few years.

Nomura Securities said this could save local governments 300 billion yuan in annual interest payments.

The downturn in China’s real estate market in recent years has severely limited an important source of revenue for local governments. Regional authorities have also had to invest in Covid-19 control during the pandemic.

Even before that, China’s local government debt had Grow to 22% of GDP by the end of 2019According to the International Monetary Fund report, income growth far exceeds that available to service debt.