Pictured here is the construction site of property developer Hongkong Land, in Shanghai on November 4, 2024.
Features China | Future Issue | Getty Images
BEIJING – China is expected to unveil more stimulus on Friday after parliament ends its five-day session.
Authorities here have ramped up stimulus announcements since late September, fueling the stock rally. President Xi Jinping led a meeting on September 26 calling for strengthening fiscal and monetary support, and ending the slump in the real estate market.
While the People’s Bank of China has cut some interest rates, the massive increase in government debt and spending requires the approval of the country’s parliament, called the National People’s Congress.
The approval can be given in the weekly meeting of the legislative standing committee. During the same meeting in October last year, the authorities have approved a rare increase in China’s deficit to 3.8%, from 3%, according to state media.
Hopes for such a scale of fiscal support have increased after Donald Trump – who has threatened harsh tariffs on Chinese goods – won the US presidential election this week. But some analysts are still cautious, warning that Beijing may remain conservative and not offer direct support to consumers.
When discussing the planned fiscal support at a press conference last month, Finance Minister Lan Fo’an stressed the need to address local government debt issues.
In parliamentary meetings so far, officials have reviewed plans to increase the limit on the amount of debt local governments can incur, according to state media. The additional quota will replace the hidden debt of the local government.
Nomura estimates that China has 50 trillion yuan to 60 trillion yuan ($7 trillion to $8.4 trillion) in hidden debt, and expects Beijing to allow local authorities to increase deb issuance by up to 10 trillion yuan over the next few years.
This could save local governments 300 billion yuan in annual interest payments, Nomura said.
In recent years, the decline of real estate in the country has drastically limited a significant source of local government revenue. Regional authorities must also spend on controlling Covid-19 during the pandemic.
Even before that, local Chinese government debt had grown to 22% of GDP by the end of 2019, more than the revenue growth available to pay off that debt, according to a report by the International Monetary Fund.
