China - More fiscal support confirmed, numbers still lacking
On Saturday, Finance Minister Lan Fo’an confirmed that the Chinese government is working out more fiscal support measures. For instance, local governments will be allowed to use the funds raised by issuing special bonds for buying homes from property developers. This could give more momentum to a property stabilisation initiative launched in May. He also confirmed that the central government has ample room to increase public debt, which could be used to strengthen the balance sheets of local governments and large state banks, provide direct income support to specific groups and support for the property sector. However, he did not put numbers to these plans, something that investors had hoped for. More news on this is expected now in late October or early November.
China Macro: Following the NDRC last week ...,
Last Tuesday, China’s economic planning agency (NDRC) provided some more details about the fiscal spending plans, that are supposed to follow the monetary/financial package launched by the PBoC on 24 September. In a published the same day, we noted that the fiscal measures presented basically did imply a frontloading of public spending, but looked quite piecemeal, and so far did not include the larger spending initiatives that were floating around over the past few weeks. We added that the authorities seem to be striking a balance between expressing a supportive stance of the economy and the stock market, while preventing another extreme boom-bust cycle (like that one of 2014-15). Also, authorities may leave some of their spending commitments open until after the outcome of the US elections, as they may need to do more on the domestic side in case of a 2nd Trump presidency. We also mentioned that other parts of the Chinese government may come out and present additional fiscal measures in the coming weeks.
... China's Finance Minister confirmed more fiscal support is underway, without giving numbers
And indeed, on Saturday, Finance Minister Lan Fo’an was the latest to give a briefing on the fiscal spending plans. He confirmed the fiscal support measures we had already hinted at in our note last week. For instance, local governments will be allowed to use the funds raised by issuing special bonds for buying homes from property developers. This could give more momentum to a property stabilisation initiative launched in May. He also confirmed that the central government has ample room to increase public debt, which could be used to strengthen the balance sheets of local governments and large state banks, provide direct income support to specific groups and support for the property sector. However, he did not put numbers to these plans, something that investors had hoped for. More news on this is expected now in late October or early November. This morning, the Chinese yuan and the oil price weakened a bit, but China’s CSI300 stock index closed 1.9% higher today.
All in all, we still judge the support measures announced so far as something that will change the balance of risks to our growth forecasts in a positive way. We will review our growth forecasts for 2024 (4.9%, just under the government’s 5% target) and 2025 (4.5%) after the publication of Q3-2024 GDP numbers, which is scheduled for coming Friday. We will publish the outcome of this revision in our October Global Monthly later this month.