SINGAPORE (Reuters) -China said on Saturday it will “significantly increase” government bond issuance to provide subsidies to low-income earners, support the property market and replenish state-owned banks’ capital as the country tries to repair its sputtering economic revive growth.
Without giving details on the size of the fiscal stimulus measures being prepared, Finance Minister Lan Foan told a news conference that there will be more “countercyclical measures” this year.
Global financial markets have been eagerly awaiting more details on China’s stimulus plans, amid fears that the 2024 economic growth target and longer-term growth trajectory could be at risk if more support is not announced soon.
Here are some comments from investors and analysts on the Chinese Ministry of Finance press conference:
RONG REN GOH, PORTFOLIO MANAGER, EASTSPRING INVESTMENTS, SINGAPORE
“Investors were hoping for new stimulus measures, accompanied by specific figures, to be announced during the MOF presser, including the size of these commitments. From this perspective, it turned out to be a bit of a joke, as only vague guidelines were given.
“That said, meaningful measures have been announced. The Ministry of Finance confirmed that there is room for the central government to increase debt, more support for housing markets and higher local government debt quotas to ease refinancing problems.
“However, as markets focused on ‘how much’ over ‘what’, they were invariably disappointed by this briefing.”
HUANG XUEFENG, CREDIT RESEARCH DIRECTOR, SHANGHAI ANFANG PRIVATE FUND CO, SHANGHAI
“The focus appears to be on financing the budget deficit and resolving local government debt risks, which is well below expectations priced into the recent stock market jump. Without schemes that target demand and investment, it is difficult to alleviate deflationary pressures.”
ZHAOPENG XING, SENIOR CHINA STRATEGIST, ANZ, SHANGHAI
“MOF focused more on discouraging local governments. It will likely add new quotas for government bonds and local bonds. We expect an implicit debt swap of 10 trillion yuan ($1.42 trillion) in the coming years. The official deficit and local bond quotas could both reach 5 trillion yuan in the future, but it doesn’t seem like much this year. We expect NPC to announce 1 trillion ultra-long government bonds and 1 trillion local bonds by the end of this month.
BRUCE PANG, CHIEF ECONOMIST OF CHINA, JONES LANG LASALLE, HONG KONG
“The message released at today’s press conference is actually entirely consistent with the expectations of those familiar with China’s policy-making process and state structure. Officials have provided answers to questions about “how,” but no details yet about “when.”
“I expect that more details and numbers of the expected fiscal stimulus measures will only be published after the upcoming meeting of the NPCSC to approve a plan to increase government bond issuance and to conduct a mid-year review of the national budget provided. And it would be reasonable and practical to leave room for policy maneuvers to prepare for external shocks and uncertainties.”
CHRISTOPHER WONG, CURRENCY STRATEGIST, OCBC, SINGAPORE
“There was mention of 2.3 trillion yuan and some details about the issuance of local bonds that could support housing construction… but that fell short of a major surprise factor. That said, we cannot lose sight of the bigger picture and this is recognized by policymakers. the problems and make real efforts to address them.
“Maybe more time is needed for more thoughtful and targeted measures. But these measures must also come quickly, because the markets are eagerly awaiting them. Too high expectations versus underperforming results would lead to disappointment and that could manifest itself in the Chinese markets. “
TIANCHEN XU, SENIOR ECONOMIST, ECONOMIST INTELLIGENCE UNIT, BEIJING
“Our overall view is quite positive in that the Ministry of Finance is prepared to address China’s many economic challenges by tapping into its borrowing space. The direct benefits to the economy will be limited as the State Department avoided large-scale direct cash payments to households. The commitment to rebuilding local government finances through budget transfers and debt replacement is highly commendable.
“In the medium term, this will put an end to aggressive deleveraging by local governments and alleviate resulting deflationary pressures. And as their financial positions stabilize, local governments will be better positioned to support the economy by providing public services and undertaking public initiatives. investments.
VASU MENON, MANAGING DIRECTOR, INVESTMENT STRATEGY, OCBC, SINGAPORE
“The Chinese government’s determination to provide a safety net for the ailing real estate market and economy was clearly reflected in the Ministry of Finance press conference. However, specific figures regarding the announced initiatives were missing. The lack of a major figure may also disappoint some. investors hoped the government would announce a significant 2 trillion yuan in new fiscal stimulus to support the economy and boost confidence.
“Investors were hoping for more measures aimed at households rather than just the real estate sector. While current measures have targeted local governments and helped them buy unsold homes, it is unclear whether this will translate into action as local governments have been reluctant. far from participating in the home purchase program, fearing that home prices could fall further.
“Nevertheless, investors will take some comfort from the finance minister’s statement that the central government has room to increase debt and deficit, and that it has other tools to use in the future. This offers hope that more can and will be done. although investors hoping for a big budget bazooka today are likely to be disappointed.
($1 = 7.0666 Chinese Yuan Renminbi)
(Reporting by Asia Markets Team and China Economic Team; Compiling by Ankur Banerjee; Editing by Kim Coghill)
