SINGAPORE (Reuters) – China said on Saturday it would “significantly increase” bond issuance to provide subsidies to low-income earners, support the property market and recapitalize state-run banks to revive sluggish economic growth. .
Finance Minister Lan Fung said at a press conference that more “stimulus measures” would be taken this year, but officials said the size of the fiscal stimulus was a key detail that global financial markets were watching closely. was not disclosed.
Some investors are concerned that China’s 2024 economic growth target and long-term growth trajectory could be at risk if more aggressive support is not announced soon. Chinese stocks rose sharply on expectations for bolder measures.
Investors and analysts’ comments on the Chinese Ministry of Finance’s press conference are as follows.
Mr. Huang yan, Investment Manager, Private Fund Company, Shanghai Qiuyang Capital Co
“The strength of the fiscal stimulus announced is weaker than expected. There is no schedule, amount or details on how the money will be used. Markets are expecting trillions of yuan in new stimulus. But… there was little good news at the press conference,” leaving limited room for imagination.
“If that’s the policy from a fiscal policy perspective, the stock market rally could lose momentum.”
Rong ren goh, Portfolio Manager, Eastspring Investments, Singapore
“Investors were hoping that the Treasury press conference would announce new stimulus with hard numbers, including the size of these commitments. It turned out to be a bit damp considering only guidance was provided.”
“Having said that, meaningful measures have been announced. Treasury has confirmed scope for increased central government debt, increased support for the housing market and expansion of local government debt facilities to alleviate refinancing issues.” did.
“However, the market is focused on the ‘how much’ rather than the ‘what’, so this briefing was set to be a disappointment.”
Fred Newman, Chief Asia Economist, HSBC Hong Kong
“By easing restrictions on local government purchases of excess housing stock, authorities are providing further support to a housing market in tatters. This is beneficial, but it is not itself an immediate fix for stabilizing the housing market. There is no specific solution.
“Officials have hinted that more can be done to support growth by emphasizing room for fiscal easing, but investors are wondering how much extra money the government is willing to spend. To that end, investors will need to take more concrete policies and be patient. likely to be announced. ”
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ZHIWEI ZHANG, Chief Economist, Pinpoint Asset Management
“The press conference did not provide specific numbers regarding fiscal stimulus.The key message is that the central government has the ability to increase the budget deficit by issuing bonds, and that the central government will support local governments with fiscal spending. The plan is to increase the issuance of government bonds in order to repay their debts.
“Although the minister did not explicitly say he would increase the budget deficit, I think his comments suggest that the government could raise the budget deficit to over 3% next year. These policies are a step in the right direction. We need to wait for the details of the policy, such as its size and composition, to determine the impact such a policy will have on the macro outlook.
“This will be the focus of the market over the next few months.”
Matthew Haupt, Portfolio Manager, Wilson Asset Management, Sydney
“Despite the lack of headline numbers, the policy measures being implemented raise the chances of a better outcome than continued negative sentiment on China’s economic outlook… I don’t think this news should be taken negatively as intended.”The flagged measures may be enough to lift sentiment, with some event funds disappointed and not meeting high expectations. While this may take away some bets on headline numbers, continued efforts to stabilize the economy and maintain adequate growth could encourage more significant capital flows. . level. ”
Mr. Huang Xuefeng, Credit Research Director, Shanghai Anfang Private Fund Co., Ltd., Shanghai
“The focus appears to be on financing the fiscal gap and resolving local government debt risks, but this is well below expectations priced into the recent stock rally.Without a deal targeting demand and investment, deflationary pressures It’s difficult to mitigate.”
Vasu Menon, Managing Director, Investment Strategy, OCBC, Singapore
“China’s much-anticipated weekend press conference from the Ministry of Finance, while strong in its resolve, lacked the numerical details the market was looking for. The big-bang fiscal stimulus that investors had been hoping for to keep the stock market rallying.” The measures were ineffective.” Please pass through.
“The Chinese government’s determination to provide a backstop to the struggling real estate market and economy was clearly communicated, but concrete numbers on announced initiatives were lacking, and there were no big headline numbers. “The government’s policy may also disappoint some investors who were looking forward to the government’s policy.”
“Still, investors will take some comfort from the finance minister’s statement that the central government has room to increase its debt and deficit and is considering other avenues in the future.”
ZHAOPENG XING, Senior China Strategist, ANZ, Shanghai
“The Ministry of Finance has placed greater emphasis on local government risk mitigation. New allocations for treasury and local government bonds are likely to be added. We expect that there will be a debt exchange.Both the public deficit and municipal bond allocation may increase.”Going forward, it will be 5 trillion yuan, but this year it is unlikely to be as much. It is expected that 1 trillion super long-term government bonds and 1 trillion local government bonds will be announced at the National People’s Congress at the end of this month. ”
Bruce Pang, China Chief Economist, Jones Lang LaSalle, Hong Kong
“The message delivered at today’s press conference is actually quite consistent with the expectations of those familiar with China’s policy-making process and state structure. Officials did not answer the ‘how’ question. However, details regarding “when” have not yet been disclosed.
“We expect details and figures of the previewed fiscal stimulus package to be made public only after the next meeting of the National People’s Congress Committee, which will approve the state issuance increase plan and mid-year amendments to the national budget.”
Christopher Wong, Currency Strategist, OCBC, Singapore
“There were mentions of 2.3 trillion yuan and details about municipal bond issuance that would support housing…but it didn’t come as a big surprise. That said, we must not lose sight of the big picture. That’s something that policymakers acknowledge are making real efforts to address those issues.
“More thorough and targeted measures may require more time. However, given market expectations, these measures also need to be implemented quickly.”
TIANCHEN XU, Senior Economist, Beijing Economist Information Department
“Our overall view is quite positive in that the Treasury is willing to use its borrowing space to address China’s many economic challenges. Therefore, the immediate benefits to the economy will be limited. However, the efforts to rebuild local finances through fiscal transfer and debt replacement are highly commendable.
(1 dollar = 7.0666 Chinese Yuan)
(Reporting by Asia Markets Team and China Economics Team; Editing by Ankur Banerjee; Editing by Kim Coghill and Sam Holmes)
