Pictured is a construction site for property developer Hongkong Land, in Shanghai on November 4, 2024.
China Advantage | Future Publishing | Getty Images
BEIJING – China is widely expected to unveil more stimulus on Friday after its parliament finishes its five-day meeting.
Authorities here have stepped up stimulus announcements since late September, sending stocks higher. President Xi Jinping chaired a meeting on September 26 that called for strengthening fiscal and monetary support and halting the decline of the real estate market.
While the People's Bank of China has already cut many interest rates, large increases in government debt and spending require approval by the country's parliament, called the National People's Congress.
This approval could be given at the week-long meeting of the standing committee of the legislature. During a similar meeting in October last year, authorities agreed to a rare increase in China's deficit to 3.8%, from 3%, according to state media.
Analysts expect an increase in the amount of financial support after the victory of Donald Trump – who threatened to impose harsh tariffs on Chinese goods – in the US presidential elections this week. But some remain cautious, warning that Beijing may remain conservative and not provide direct support to consumers.
When discussing the planned financial support at a press conference last month, Finance Minister Lan Fuan stressed the need to address local governments' debt problems.
In the parliamentary meeting so far, officials have reviewed a plan to increase the maximum amount of debt local governments can issue, according to state media. The additional share will go toward swapping hidden debts owed by local governments.
Nomura estimates that China has between 50 trillion yuan and 60 trillion yuan ($7 trillion to $8.4 trillion) of such hidden debt, and expects Beijing to allow local authorities to increase debt issuance by 10 trillion yuan over the next few years.
Nomura Bank said this could save local governments 300 billion yuan in interest payments annually.
In recent years, the country's real estate recession has dramatically reduced a major source of local government revenue. Regional authorities have also had to spend on Covid-19 controls during the pandemic.
Even before that, Chinese domestic government debt had grown to 22% of GDP by the end of 2019, far exceeding the growth in revenues available to repay that debt, according to a report by the International Monetary Fund.
