BEIJING (Reuters) – China’s Finance Ministry on Saturday unveiled a fiscal stimulus package aimed at reviving the weak economy and achieving the government’s growth target, although it did not disclose the extent of the new measures.
The ministry said at a news conference that it would “significantly” increase government bond issuance to provide subsidies to low-income households, support the real estate market and replenish the capital of state-owned banks as part of efforts to boost economic growth to give impetus.
The long-awaited briefing comes after the central bank and other regulators announced the most aggressive monetary stimulus since COVID-19 in late September, including steps to revive the ailing real estate market such as mortgage rate cuts.
Reuters reported last month that China plans to issue special government bonds worth about 2 trillion yuan ($283.02 billion) this year as part of new fiscal stimulus.
Below are the key measures announced by Finance Minister Lan Foan at a press conference, where he was accompanied by Vice Finance Ministers Liao Min, Wang Dongwei and Guo Tingting.
LOCAL DEBT RESOLUTION
China will increase support for local governments to address hidden debt risks, boosting their ability 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 debts owed to companies.
China is planning a massive debt swap program, alongside the continued use of bond quotas for debt repayment, described as the “biggest” policy move in recent years. Detailed policies will be announced after the necessary legal procedures have been completed.
RECAPITALIZATION OF THE BANK
China will expand the use of local government bond proceeds to support the real estate market and recapitalize major state-owned banks. Special government bonds will be issued to strengthen the core capital of major state-owned commercial banks, improving their ability to withstand risks and provide credit to the real economy.
SUPPORTING THE REAL ESTATE MARKET
Local governments will be allowed to use special bonds to purchase unused land, increasing their ability to manage the supply of land and easing liquidity and debt pressures on both local governments and developers.
China will also support the purchase of existing commercial properties for use as affordable housing and continue to finance affordable housing projects.
The government is reviewing value-added tax policies related to housing, and exploring other tax policies to support the real estate market.
SUPPORT FOR LOW-INCOME HOUSEHOLDS AND STUDENTS
The government will increase support for low-income people and students to boost consumption. The number of national scholarships for students will be doubled from 60,000 to 120,000 per year, with the value of each scholarship increasing from 8,000 yuan to 10,000 yuan per student per year.
Lan also noted that the central government has “relatively a lot of room” to increase debt and widen the budget deficit, although he did not provide details.
China has set this year’s budget deficit at 3% of GDP, up from a revised 3.8% last year. The issuance of 1 trillion yuan of special ultra-long government bonds this year is not included in the budget. Local governments will issue 3.9 trillion yuan of special bonds in 2024, up from 3.8 trillion yuan last year.
($1 = 7.0666 Chinese Yuan Renminbi)
(Reporting by Kevin Yao; Editing by Kim Coghill)
