China to introduce incremental fiscal policy measures to stabilise growth

Mysteel: China's Ministry of Finance will introduce a series of targeted incremental policy measures in the near future, focusing on stabilising economic growth, expanding domestic demand, and mitigating risks, said Finance Minister Lan Fo'an at a press conference on Saturday.

The package includes supporting local governments in resolving hidden debts, aiding large state-owned commercial banks in replenishing core tier-one capital, promoting stabilisation in the real estate market, and increasing support for key vulnerable groups, among others.

The government is studying additional counter-cyclical measures. Lan said, "For example, the central government still has significant room for issuing debt and increasing the fiscal deficit."

The government plans to significantly increase the debt ceiling to swap local governments' hidden debt, in a bid to step up the support for local governments to address debt risks. Once the legal procedures are completed, further details of the policy will be released to the public.

This is the most substantial debt relief measure introduced in recent years, which will greatly reduce the financial burden on local governments, allowing them to allocate more resources towards economic development and securing essential public services at the grassroots level, Lan said.

The finance ministry will explore expanding the scope of special bond usage, maintain the intensity and pace of government investment, and reasonably reduce financing costs, said Vice Finance Minister Wang Dongwei at the same press conference.

Since 2020, China has cumulatively arranged for an additional RMB 18.7 trillion ($2.63 trillion) in local government special bonds, and for 2024, the quota for new special bonds has been set at RMB 3.9 trillion, the largest scale ever.

As of end-September, local governments had issued RMB 3.6 trillion in new special bonds, accounting for 92.5% of the annual quota, Wang said.

Moving forward, the ministry will focus on better leveraging the role of government investment and increase the support for economically strong provinces in terms of special bond quota, with allocation tilted towards regions with well-prepared projects and high investment efficiency to support project construction in these provinces.

Meanwhile, the ministry will reasonably arrange special bond quotas for other regions to promote the completion of ongoing projects and the implementation of major national strategic projects.

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