In a recent press conference, China’s Finance Minister Lan Foan announced plans to increase government debt issuance to provide subsidies to low-income individuals, support the property market, and bolster state banks’ capital. Although details on the size of the fiscal stimulus were not disclosed, there will be more “counter-cyclical measures” put in place this year.
Investors and analysts shared their thoughts on the announcements made by the Ministry of Finance:
Rong Ren Goh, Portfolio Manager at Eastspring Investments in Singapore, noted that while the measures announced were meaningful, the lack of specific numbers left investors wanting more details. The focus was on central government debt, housing market support, and increased local government debt quotas.
Huang Xuefeng, Credit Research Director at Shanghai Anfang Private Fund Co in Shanghai, expressed concerns that the focus on fiscal gap funding and local government debt risks may not be sufficient to alleviate deflationary pressure without measures addressing demand and investment.
According to Zhaopeng Xing, Senior China Strategist at ANZ in Shanghai, the focus was on derisking local governments, with expectations of a 10 trillion yuan ($1.42 trillion) implicit debt swap in the coming years and potential increases in official deficit and local bond quotas.
Bruce Pang, Chief Economist China at Jones Lang LaSalle in Hong Kong, emphasized that more details on the fiscal stimulus are likely to be released after the upcoming meeting of the National People’s Congress Standing Committee (NPCSC).
Christopher Wong, Currency Strategist at OCBC in Singapore, highlighted the efforts of policymakers to address economic challenges, albeit without any major surprises in the announcements. Wong cautioned against setting overly high expectations compared to actual delivery.
Tianchen Xu, Senior Economist at Economist Intelligence Unit in Beijing, commended the Ministry of Finance for leveraging borrowing room to address economic challenges. While immediate benefits may be limited, steps taken to stabilize local finances are seen as positive for the economy in the medium term.
Vasu Menon, Managing Director of Investment Strategy at OCBC in Singapore, noted the government’s commitment to supporting the property market and economy. However, the lack of specific numbers in the announcements may disappoint some investors looking for a more substantial fiscal stimulus package.
Overall, the announcements made by the Ministry of Finance in China are seen as steps towards addressing economic challenges and stabilizing local finances. While details on the size and scope of the fiscal stimulus were lacking, investors are hopeful for additional measures to support the economy in the near future. Stay tuned to Extreme Investor Network for more updates on this developing situation.