SINGAPORE (Reuters) – China said on Saturday it would significantly increase government debt issuance to provide support to low-income people, support the property market and replenish state banks’ capital as part of its efforts to revive faltering economic growth.
Finance Minister Lan Fuan told a news conference that there would be more “counter-cyclical measures” this year, but officials did not clarify the size of the fiscal stimulus, the key detail that global financial markets are looking forward to seeing.
Some investors fear China’s 2024 economic growth target and long-term growth path could be at risk if more robust support is not announced soon. Chinese stocks rose strongly on hopes of bolder action.
Below are some comments from investors and analysts on the press conference held by the Chinese Ministry of Finance:
Huang Yan, Investment Director, Private Fund Company Shanghai Qiuyang Capital, Shanghai
“The strength of the announced fiscal stimulus plan is weaker than expected. There is no timeline, no amount, and no details on how the money will be spent. The market was expecting trillions of yuan in new stimulus…but the briefing provided little good news, and limited room for imagination.” .
“If this is what we have in terms of fiscal policies, the uptrend in the stock market may run out of steam.”
Rong Ren Goh, Portfolio Manager, Eastspring Investments, Singapore
“Investors were hoping for new stimulus announcements, accompanied by specific numbers, at the Finance Ministry press conference, including the size of these commitments. From this perspective, it turned out to be a bit of a damp quip given that only vague guidance was given.”
“However, meaningful measures were announced. The Ministry of Finance stressed that there is scope for the central government to increase debt, further support housing markets, and increase local government debt shares to mitigate refinancing problems.
“However, with markets focusing on ‘how much’ rather than ‘what’, they were always willing to be frustrated by this briefing.”
Fred Newman, Chief Asia Economist at HSBC, Hong Kong
“By easing restrictions on local governments to purchase excess housing stock, officials are providing more support to damaged housing markets. While this is helpful, it does not in itself provide a quick fix to stabilize the housing market.”
“By emphasizing the scope they have for fiscal easing, officials are signaling that more can be done to support growth, but investors are questioning how much additional money the government is willing to allocate. For this reason, investors will have to be patient, with more concrete commitments likely The numbers will be revealed at the end of the month, once the Standing Committee of the National People’s Congress has had the opportunity to review and vote on specific proposals.
Ziyue Zhang, Chief Economist, PINPOINT Asset Management
“The press conference did not provide specific numbers on fiscal stimulus. The main messages are that the central government has the ability to issue more bonds and raise its fiscal deficit, and the central government plans to issue more bonds to help local governments pay their debts.
“While the minister did not explicitly say they would raise the fiscal deficit, I think his comments indicate that it is possible for the government to raise the fiscal deficit above 3% for next year. These policies are in the right direction. To assess the impact of such policies on the overall outlook, we need to wait Details of these policies, such as size and configuration.
“This will be the focus of market attention in the coming months.”
Matthew Haupt, Portfolio Manager, Wilson Asset Management, Sydney
“Although there are no headline figures, the policy tools being implemented increase the odds of better outcomes within the Chinese economy compared to the ongoing negative sentiment around its prospects…I do not believe the news should be taken negatively as the intent and more will be the actions taken.” Reporting is enough to move sentiment higher, likely to disappoint some event funds and remove some bets on headline numbers that do not meet high expectations, but more significant capital inflows may be encouraged by continued efforts to stabilize the economy and maintain growth at the appropriate level. “Levels.”
Huang Xiufeng, Director of Credit Research, Shanghai Anfang Private Fund Company, Shanghai
“The focus appears to be on financing the fiscal gap and resolving local government debt risks, which is far below expectations factored in the recent jump in the stock market. Without arrangements targeting demand and investment, it will be difficult to mitigate deflationary pressures.”
Vasu Menon, Managing Director, Investment Strategy, OCBC, Singapore
“The Chinese Ministry of Finance’s much-anticipated press conference over the weekend was strong in design but lacked numerical detail, which is what markets were looking for. The big fiscal stimulus that investors were hoping for to keep the stock market rally going didn’t work. through.
“Although the Chinese government’s determination to provide support to the struggling real estate market and economy has been clearly demonstrated, there have been no concrete numbers regarding the initiatives announced. Also, the lack of a major headline number may disappoint some investors who were hoping that the The government announces a major new fiscal stimulus worth 2 trillion yuan to support the economy and boost confidence.
“However, investors will take some comfort from the Finance Minister’s statement that the central government has room to increase debt and deficit, and that it has other tools it is considering using in the future.”
Zhaoping Xing, Chief China Strategist, ANZ, Shanghai
“The Ministry of Finance has focused more on reducing risks to local governments. It will likely add new quotas of Treasuries and local bonds. We expect an implicit debt swap of 10 trillion yuan ($1.42 trillion) in the next few years. Both the official deficit and quotas may rise Domestic bonds to 10 trillion yuan ($1.42 trillion).” 5 trillion yuan going forward but it seems (that is) not much this year, we expect the NPC to announce 1 trillion yuan and 1 trillion yuan long-term treasury bonds at the end of this month.
Bruce Pang, chief economist for China, and Jones Lang LaSalle, Hong Kong
“The message from today’s press conference is fully in line with the expectations of people familiar with China’s policy-making process and state structure. Officials have provided answers to questions about ‘how’, but no details about ‘when’, yet.
“I expect that more details and the number of fiscal stimulus previewed will only be released after the next meeting of the NPCSC to approve a plan to increase treasury issuances and submit a mid-year review of the national budget.”
Christopher Wong, Currency Strategist, OCBC, Singapore
“The 2.3 trillion yuan and some details about the issuance of local bonds that could support housing have been mentioned…but it has stopped short of a big surprise factor. However, we should not lose sight of the bigger picture, which policymakers acknowledge. The issues and are making A real effort to address these issues.
“More time may be needed for more thoughtful and targeted measures. But these measures also need to come quickly because markets are eagerly awaiting them.”
Tianchen Xu, Senior Economist, Economist Intelligence Unit, Beijing
“Our overall position is very positive that the Ministry of Finance is prepared to address China’s many economic challenges by leveraging its borrowing space. The direct benefits to the economy will be limited, as the Ministry of Finance has avoided providing large-scale direct cash grants to households. However, the commitment is “Restoring domestic public finances through fiscal transfer and debt replacement is highly commendable.”
($1 = 7.0666 Chinese yuan)
(Reporting by the Asian Markets team and the China Economy team; Compiled by Ankur Banerjee; Editing by Kim Coghill and Sam Holmes)