China’s State Council Information Office held a long-awaited press conference on Saturday, chaired by Finance Minister Lan Fu’an.
The market was hoping for more announcements on fiscal stimulus after media was told that an invitation said officials would outline the country’s plans to intensify counter-cyclical adjustments in its fiscal policy.
Instead, the press conference was light on plans and details, including the value of the stimulus. Officials highlighted the country’s large borrowing capacity, pledged a “significant increase” in debt and said they were considering further counter-cyclical measures.
“There is still relatively large scope for China to issue debt and increase the fiscal deficit,” Lan said.
Lan highlighted that local governments have 2.3 trillion yuan in a local debt fund to spend in the last three months of the year, but it is from bonds that have already been issued (and known) but have not yet been used. He stressed that they have the opportunity to buy unused housing units to turn them into affordable housing, which is part of Beijing’s larger strategy to boost the housing market.
The result is that we will have to wait until legislative meetings in the coming weeks to make real policy announcements, although it appears they are coming and will be announced “step by step,” according to Lan.
Does the market have the patience to wait? I’m skeptical.
Shanghai Composite Daily