China is contemplating the approval of a substantial fiscal package, which could involve the issuance of more than 10 trillion yuan (approximately $1.4 trillion) in additional debt over the coming years, Reuters reports.
This initiative aims to revitalize the nation’s economy, which has been struggling amid a prolonged property crisis and increasing local government debt.
The National People’s Congress (NPC), China’s top legislative body, is expected to discuss this fiscal package during its upcoming meeting from November 4 to 8. Among the proposed measures, 6 trillion yuan would be raised through special sovereign bonds to help local governments mitigate off-the-books debt risks. The total planned issuance would represent over 8% of China’s GDP, highlighting the government’s commitment to economic stimulus.
In addition to the 6 trillion yuan for local government debt relief, the package may include up to 4 trillion yuan in special-purpose bonds aimed at facilitating the purchase of idle land and properties. These measures are designed to enhance local governments’ capacity to manage land supply while alleviating liquidity pressures on both local authorities and property developers.
Sources indicate that the timing of the NPC meeting coincides with the US presidential election on November 5. There is speculation that Beijing may adjust its fiscal strategy depending on the election’s outcome, particularly if Donald Trump wins a second term. Trump’s return to the presidency could exacerbate economic challenges for China, as he has previously indicated intentions to impose significant tariffs on Chinese imports.
Analysts note that the proposed fiscal measures represent a shift towards increased government spending to support economic growth. However, they also emphasize that this approach does not match the scale of the 2008 stimulus package, which accounted for 13% of China’s GDP at the time. Instead, the current measures are seen as a more moderate response to ongoing economic challenges.
China’s recent efforts to bolster its economy include aggressive monetary policies and earlier fiscal announcements aimed at addressing structural issues. Despite these efforts, experts caution that a substantial turnaround in economic growth may not be imminent, given the modest support for consumption and ongoing deflation risks.
