China's Investors Left Wanting After Ministry Keeps Mum on Stimulus Plan

China’s Ministry of Finance recently held a press conference that many investors were eagerly anticipating. However, the outcome left them feeling disappointed. Instead of announcing a significant, wide-reaching fiscal stimulus package, the Ministry focused on addressing existing problems related to local government debt and the struggling property market, which are critical issues impacting the nation's economic growth.

Expectations for Mild Stimulus Measures

Despite the lack of a large stimulus announcement, analysts still hope for some modest changes from the Ministry. These might include adjusting the fiscal deficit ratio, which is currently set at 3 percent, as well as increasing the issuance of both ultra-long special treasury bonds and local government bonds. Additionally, tax cuts could also be on the horizon, providing relief to various sectors of the economy.

Proposed Changes for Local Governments

The Ministry outlined several initiatives during the one-hour conference aimed at assisting local governments and the financial system as a whole. This includes raising debt ceilings and making use of an existing government bond quota that had not been utilized. Moreover, there is a plan for fiscal support directed towards the property market, alongside measures to bolster the capital reserves of major state-owned banks.

Considerable Funding for Local Governments

Finance Minister Lan Foan indicated that local governments could access a total of 2.3 trillion yuan (approximately US$325.3 billion) in special bond funding over the final three months of the year. This funding can help alleviate some of the financial pressures localities are facing.

Addressing Hidden Debts

In an effort to tackle hidden debts, the central government is set to implement a substantial one-time increase in debt ceilings. This measure is viewed as a powerful step towards supporting debt reduction, marking one of the most significant actions the government has taken in recent years.

Support for the Property Sector

As for the troubled property sector, Deputy Finance Minister Liao Min revealed that local governments are now permitted to use special bonds to buy up idle land and unsold commercial properties from struggling developers. This is intended to provide a level of support to the industry, which has been facing considerable challenges.

China, Investors, Stimulus