China's New Fiscal Measures to Support Growth and Stability

China is preparing to implement a set of targeted incremental fiscal policies aimed at stabilizing economic growth, boosting domestic demand, and reducing financial risks. This announcement was made by Minister of Finance Lan Fo'an during a recent press conference.

Details of the Fiscal Package

The fiscal package includes some significant measures. One major component is the increase of the debt ceiling for local governments. This increase will occur in a lump sum and is intended to replace existing hidden debts. The goal is to help mitigate the debt risks that local governments currently face.

Another critical element involves the issuance of special treasury bonds. These bonds will provide support to major state-owned commercial banks, enabling them to replenish their core Tier 1 capital. By enhancing the capital base of these banks, the government aims to improve their resilience to economic challenges and increase their capacity to lend.

Stabilizing Real Estate and Supporting Communities

In addition to these measures, the fiscal package will employ various tools such as local government special bonds, special funds, and changes in tax policies. These tools are designed to stabilize the real estate market and prevent further price declines, which can have broader implications for the economy.

Minister Lan also emphasized the government's commitment to supporting vulnerable groups. Prior to the National Day holiday, one-time living allowances were distributed to those in need. Moving forward, the government plans to enhance its efforts by providing additional awards and aid to students, aiming to boost overall consumer spending.

Policy Framework and Future Adjustments

These four key policy measures have already entered the decision-making phase, indicating that they are moving quickly toward implementation. However, the minister clarified that these adjustments are not exhaustive. The government is also considering other policy tools to further address economic challenges. Notably, there is still significant room for the central government to borrow more and increase its deficit, which could allow for additional fiscal measures in the future.

China, Fiscal, Growth