Disappointment for Investors as China’s Finance Ministry Stays Silent on Major Stimulus

China’s Ministry of Finance held a press conference on Saturday, but it did not announce a comprehensive fiscal stimulus package that many were hoping for. Instead, the ministry focused on addressing two critical issues that are currently hindering the nation’s economic growth: local government debt and challenges in the property market.

Expected Measures Were Not Announced

Despite the lack of a broad stimulus, analysts are still predicting that the ministry might take some moderate steps to invigorate the economy. These measures could include raising the fiscal deficit ratio from its current level of 3 percent, issuing additional ultra-long special treasury bonds, increasing local government bonds, and possibly implementing tax reductions.

Key Changes Presented by the Ministry

During the one-hour conference, several initiatives were announced aimed at supporting local governments and stabilizing the financial system. These include lifting debt ceilings, utilizing an unused government bond quota for funding, providing fiscal support for the struggling property market, and ensuring that major state-owned banks have sufficient capital. Finance Minister Lan Foan indicated that local governments could tap into 2.3 trillion yuan (approximately US$325.3 billion) in special bond funding through the end of the year.

In addition, the central government is set to implement a one-time, significant increase in the debt ceiling. This change is specifically designed to help local governments convert their hidden debts into more manageable forms, which the minister referred to as "the most powerful measure to support debt reduction introduced in recent years."

As for the property sector, Deputy Finance Minister Liao Min noted that local governments will have the ability to use special bonds for purchasing idle land and unsold commercial properties from distressed developers. This change aims to stimulate activity in a market that has been facing serious difficulties.

China, Investors, Stimulus