The Chinese government is under immense pressure from not being able to close this year with GDP growth of 5% and that is why it is planning a fiscal stimulus package which, according to consensus, will be between two or three trillion yuan (between approximately $256,000 and $387,950). million euros) and 10 billion (around 1.3 billion euros). Chinese Finance Minister Lan Foan is expected to announce details of the fiscal package at a news conference today.
Market analysts and economists agree that the authorities are preparing this fiscal stimulus plan, while others are more skeptical about its realization.
Regardless, China needs a significant stimulus, especially with regard to the real estate sector, mired in a deep crisis that is hampering the smooth functioning of the country’s economy. And they must also feed an internal demand which has never recovered from the secrecy with which the Asian giant managed the Covid pandemic.
Ahead of the Golden Week holiday (which runs from October 1 to 7), Xi Jinping’s government announced a series of recovery policiesincluding interest rate cuts, lower cash reserve requirements at banks, more flexible rules for property purchases and support for stock market liquidity. Little preambles so that consumers can lighten their pockets even more during the holidays.
Experts were convinced that this small stimulus package was like a prelude to something bigger. Beijing was prepared to take far-reaching measures to revive its ailing economy.
Chetan Ahya, chief economist for Asia at Morgan Stanley, assured the American channel NBC that this package would probably cover: to stimulate domestic demandsupport the recapitalization of banks as well as the restructuring of the significant debt of local authorities.
Regarding the overdraft of public accounts of municipalities, the State Council has already presented a report in which it urges local governments to apply strict budgetary discipline, strengthen budgetary restrictions, and strictly prohibit investment in projects by means of debts contracted illegally by companies and state institutions. .
At the beginning of the summer, the first results of these “austerity” policies were already visible. The famous hidden debt The total was estimated at 32.2 billion yuan (around 4 billion euros), compared to nearly 70 billion yuan recorded at the start of the year.
Despite this correction, it is not enough that this mountain of debt ceases to be a problem for the country’s growth, and that is why these fiscal stimulus measures are so necessary.
Experts at Morgan Stanley called the budget plan “modest” in a note and reiterated that it is “Beijing’s second chance” after it failed to meet its targets.
The performance of the Chinese economy so far this year can be described as “weak”. In the first quarter, GDP increased by 1.2%. Between April and June it increased by 1.5% and in the third quarter of the year (until September) the expansion was 0.7% compared to the previous three months.
For his part, Ting Lu, chief economist at Nomura, expects the Ministry of Finance to announce a package not exceeding 3% of GDP of China, which increased by 5.2% to 126,000 billion yuan (16,200 billion euros) in 2023.
In this sense, Reuters said that China plans to issue special sovereign bonds worth 2 trillion yuan (around 260 billion euros) this year, of which 1 trillion yuan (130 billion) would be intended to stimulate domestic consumption and the rest to alleviate debt problems. local governments across the country.
However, China’s fiscal policy change processes involve arduous legal procedures that require approval, which is why many are not predicting big announcements at this weekend’s press conference.
