China unveils stimulus package to boost economy battered by years of real estate sector crisis and chronic consumption slump (ADEK BERRY)
China announced on Saturday that it would issue special bonds to support its struggling economy, as part of the largest aid package in years to strengthen banks, strengthen the real estate market and ease local government debt. He hinted at an increase in spending.
The plan is part of a series of actions taken by the Chinese government to end a years-long real estate sector crisis and chronic consumption slump plaguing the world’s second-largest economy.
The special bonds planned by the Chinese government are aimed at increasing the capital available to banks and are part of an effort to encourage banks to lend in hopes of stimulating sluggish consumer spending.
China is also preparing to allow local governments to borrow additional funds to acquire unused land for development, as it seeks to break free from a long-term slump in the real estate market.
The figure does not give an indication of the planned size of the special bond, which was announced at a long-awaited press conference by Finance Minister Lan Foin and others, following a series of measures launched in recent weeks, including lower interest rates and more liquidity for banks. It wasn’t done.
But Lan said China still has room to “issue debt and widen the deficit” to fund new measures.
Officials are struggling to reverse China’s slowdown and meet this year’s 5% growth target. That’s the envy of many Western countries, but it’s a far cry from the double-digit growth that has propelled the Asian giant for years.
Lan said on Saturday that the Chinese government is “accelerating the use of additional government bonds, and special long-term bonds are also being issued for use.”
“Over the next three months, special bond funds totaling 2.3 trillion yuan may be arranged to be used in various places,” he added.
In addition, the Chinese government also plans to “issue special bonds to support major state-owned commercial banks,” Lan said, without disclosing the amount.
Chinese authorities are asking commercial banks to expand lending and lower mortgage rates, which will put more cash into consumers’ pockets.
Therefore, Chinese government bonds will help banks increase their capital and give them more room to lend.
～Building bonds～
Additionally, special bonds will be issued that will allow local governments to acquire unused and idle land for development, which could support the housing market, Vice-Minister of Finance Liao Min said.
The move “will help ease liquidity and debt pressures on local governments and real estate companies,” he explained.
The Chinese government also plans to encourage the acquisition of existing commercial properties for use as affordable housing.
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But analysts expressed frustration that the Chinese government has refrained from revealing figures for further fiscal stimulus.
“The key message is that…the central government has the ability to increase the budget deficit by issuing more bonds, and…the central government plans to issue more bonds to help local governments repay their debts. “President Zhang Zhiwei said. said Chief Economist at Pinpoint Asset Management.
Heron Lim of Moody’s Analytics told AFP that Beijing was likely “still working out the details of its fiscal stimulus”.
“In the meantime, investors may take a step back until they are completely sure of the direction of fiscal policy.”
– “Lack of positive guidance” –
Uncertainty in China’s economy is also fueling a vicious cycle that keeps consumption stubbornly low.
Julian Evans-Pritchard, head of China economics at Capital Economics, said on Saturday: “There was no mention whatsoever of large-scale handouts to consumers.”
“The lack of forward guidance on the size of next year’s fiscal deficit means it remains difficult to judge how large and long-term any fiscal stimulus will be,” he said.
Chinese policymakers have announced a series of stimulus measures in recent weeks, including a series of interest rate cuts and loosening restrictions on home purchases, but economists say more steps are needed to permanently lift the economy out of doldrums. states.
At the request of the government, major Chinese banks announced early Saturday that they would lower existing mortgage interest rates starting October 25, according to state media.
The state broadcaster said, “Except for second mortgages in Beijing, Shanghai, Shenzhen and some other regions, the interest rate for other eligible mortgages is at least 30 basis points above the prime lending rate, which is the People’s Bank of China’s mortgage reference rate. It will be adjusted so that it does not fall below the points.” CCTV reported.
CCTV reported that major banks, including Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China and China Construction Bank, announced that the adjustments would be made “all at once.”
Last month, the People’s Bank of China asked commercial banks to lower these rates by October 31.
Last month, the Chinese government lowered interest rates on one-year loans to financial institutions, reducing the amount of cash they must hold on hand and pushing for lower interest rates on existing mortgages.
And the central bank this week stepped up its support for markets by releasing tens of billions of dollars of liquidity for companies to buy stocks.
Balm Juoho/Hamun
