In a strategic move to bolster the struggling property sector and counteract an economic slowdown, China will permit local governments to issue bonds aimed at purchasing unsold homes. Finance Minister Lan Fo’an made this announcement during a briefing on Saturday, outlining the authorities’ plan to utilize special local government bonds and additional tools to support the real estate market.
Lan emphasized that the central government possesses substantial capacity to increase spending, signaling a commitment to alleviating the debt burden on local governments. This includes the introduction of a “big” one-off quota to enable these governments to exchange high-interest debt for bonds with lower interest rates.
“The central government still has considerable room to borrow and expand the deficit,” Lan stated, while also noting that other strategies are under consideration beyond those disclosed during the briefing. However, he did not provide specific figures regarding the funds available for home purchases through these special bonds.
Fiscal support has been a significant gap in the stimulus initiatives Beijing began implementing in late September. This unprecedented effort, led by the central bank, has encompassed a range of measures, including interest rate reductions and support for both the property and stock markets.
Prior to the briefing, a Bloomberg survey of investors and economists anticipated a commitment from the government of up to 2 trillion yuan in new fiscal stimulus.
Increasing public spending is seen as vital for reviving China’s economy, which is currently experiencing deflationary pressures and risks failing to meet the government’s 2024 growth target of approximately 5%.
Investors closely monitored Lan’s remarks for insights into the extent of Beijing’s pro-growth strategies, which have already sparked a remarkable rally in the stock market.
Related topics:
