To help poor people, boost state banks’ capital, and speed up slow economic growth, China’s finance minister said on Saturday that the country will “significantly increase” the amount of debt it issues.
Finance Minister Lan Fo’an said on Saturday that the Chinese government is looking at other ways to boost economic growth. However, he did not give any information about the new fiscal stimulus plan that analysts were expecting. Investors were hoping Lan would announce a plan to boost the economy that would cost up to 2 trillion yuan ($280 billion).
At a press conference, he said, “Other policy tools are still being talked about and are in the works.” He also said, “The central government still has quite a bit of room to borrow money and increase the deficit.”
Bloomberg said that after the news came out, China’s national bonds didn’t change much. In China, the stock market is closed on Saturdays.
Since the COVID-19 pandemic limits were lifted in late 2022, China’s economic growth has stayed slow. Companies have cut back on jobs, and people are spending less because the housing market has been down for a long time.
But even though the government has raised pensions and given money to people who trade in old cars or tools for new ones, the economy has not grown. The Standing Committee of the National People’s Congress, which is the parliament ruled by the Communist Party and is in charge of the government budget, agreed to add more sovereign debt, which will bring the budget deficit to about 3.8% of gross domestic product.
After the central bank and other government agencies said they would take steps to help the housing market and financial markets at the end of September, Chinese stock markets went up. Chinese markets SHCOMP -2.55% 000300 -2.77% hit their highest level in two years, rising 25% after the news came out. However, they quickly fell back because officials hadn’t given any more information about the policy. The prices of iron ore, industrial metals, oil, and other commodities around the world have also been very unstable in the hopes that support will boost slowing Chinese demand.
On Saturday, the finance minister said that the government would take a series of small steps to make its current policies work faster. Some of these are giving more money to students in the form of scholarships, releasing bonds to help big banks get their capital back, and helping local governments that are deeply in debt and have had to cut back on public services.
Zhiwei Zhang, president and chief economist at Pinpoint Asset Management in Hong Kong, said in a note Saturday, “These policies are going in the right direction.” He also said that more information is needed to figure out how these policies will affect the economy as a whole, and that “this will be the focus of the market in the coming months.”
According to Reuters, China is going to issue special national bonds this year worth about 2 trillion yuan ($284.43 billion). This is part of a new plan to boost the economy.
The economy is predicted to be even weaker in October, when the data comes out. However, officials have said they have “full confidence” that the 2024 goal will be met, according to Reuters.
