China to Significantly Increase Spending to Revive Economic Growth
China has announced plans to significantly increase government debt issuance to support low-income citizens, boost the property market, and replenish state banks’ capital. Finance Minister Lan Foan stated that there is still relatively big room for China to issue debt and that there will be more “counter-cyclical measures” this year.
The fiscal stimulus measures aim to address strong deflationary pressures due to a sharp property market downturn and frail consumer confidence. This has exposed China’s over-reliance on exports in an increasingly tense global trade environment.
Key details of the plan include:
– **Debt Issuance**: China plans to issue 2.3 trillion yuan in special bonds over the next three months to boost the economy.
– **Local Government Support**: Local governments will be allowed to repurchase unused land from property developers and have 2.3 trillion yuan to spend in the last three months of the year, including debt quotas and unused funds.
– **Subsidies**: Half of the special sovereign bonds will be used to help local governments tackle their debt problems, while the other half will subsidize purchases of home appliances and other goods, as well as finance a monthly allowance of about 800 yuan per child to all households with two or more children.
Despite these measures, analysts note that China needs to address more deeply rooted structural issues such as boosting consumption and reducing its reliance on debt-fuelled infrastructure investment.
