PEKING, October 13, 2024 - Chinese Finance Minister Lan Foan announced a significant expansion of government bond issuance to stimulate the economy. The measures aim to support low-income individuals, revive the real estate market, and replenish state bank capital.
Lan stated that there is still considerable room for China to increase its debt and budget deficit. Although no specific figures were provided, he indicated that further "counter-cyclical measures" would be introduced.
The Chinese economy has been struggling to recover post-COVID-19, prompting the government to unveil its largest stimulus program since the pandemic to halt the economic downturn. However, speculation on the extent of these measures has emerged in financial markets.
It is reported that around two trillion Yuan (approximately 259 billion Euros) in special government bonds may be issued to finance investments, with half dedicated to boosting consumption through incentives for replacing old appliances. The other half aims to assist local governments in managing their debt.
Experts warn that the absence of concrete figures regarding stimulus measures could lead to disappointment in the markets. Despite this, some analysts believe the plans could help the economy, even amidst expected long-term growth slowdowns.
China is currently grappling with deflationary pressures, a struggling real estate sector, and high regional government debt. Low wages and high youth unemployment continue to hinder domestic consumption, increasing reliance on exports, which are facing challenges due to a weak global economy and geopolitical tensions.
Recent economic data from China has been disappointing, raising concerns among economists and investors about the government's targeted growth rate of around five percent for the year and the potential for a longer-term economic downturn.