(Bloomberg) – As investors await a parliamentary meeting expected to unveil key fiscal policy details, Vice-Minister of Finance Liao Min says China’s latest stimulus rollout will boost domestic demand. said that the focus is on achieving China’s annual growth targets.
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“The goal is to expand domestic demand and strengthen macro policy power to achieve this year’s GDP growth target,” Liao said in Washington on Friday on the sidelines of the annual meetings of the International Monetary Fund and the World Bank. told Bloomberg News. “And in the meantime, we will work with monetary policy to rebuild the economy, in particular promoting the expansion of domestic demand, including consumption.”
“The scale of this package will be quite large,” he said, repeating a view expressed earlier by Finance Minister Lan Foin.
Liao said he had made it clear to representatives of other countries that the details of China’s fiscal policy would only be revealed after the National People’s Congress Standing Committee, scheduled to be held from November 4 to November 8. . “It’s a process that has to go through for China’s fiscal policy,” he added.
Chinese authorities have launched the boldest economic stimulus package since the pandemic in recent weeks, after a series of weak economic indicators put the government at risk of missing its annual economic growth target of about 5%. The package includes lower interest rates, more cash for banks and support for the housing sector, but measures such as promoting stabilization of local government debt are seen as more focused on reducing risk than stimulating growth.
China’s years-long real estate crash has wiped out billions of dollars in household wealth and put deflationary pressures on the economy as consumers become cautious. Liao said the use of super-long-term special sovereign bonds to finance this year’s consumer goods trade-in program was “unprecedented.”
“This indicates to some extent that consumption has become an important consideration in China’s fiscal policy decisions,” he said.
Treasury Secretary Janet Yellen criticized previous stimulus efforts in Washington this week for failing to address the delicate issue of overcapacity, as weak domestic demand sends a flood of cheap exports overseas. . IMF Director Kristalina Georgieva also warned that without reforms to boost domestic consumption, China’s annual growth rate could fall “well below” 4% in the future.
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Liao’s defense of the country’s blueprint for economic revitalization comes as China’s leading lawmakers prepare to hold a long-awaited meeting where they are expected to rubber-stamp the government’s borrowing package. Earlier this month, Finance Minister Lang and his deputy announced measures including recapitalizing major state-owned banks and starting a local debt exchange program, but did not specify how much would be spent.
Economists are busy speculating about the size of that package. Citigroup expects about 3 trillion yuan ($421 billion) of additional fiscal power this year to be spent equally on tackling revenue shortfalls, boosting growth and recapitalizing banks. Goldman Sachs Group Inc. estimates that replacing hidden local debt will cost about 5 trillion yuan over several years.
Lawmakers will meet to approve a full range of policies in the same week as the close US presidential election, with a final decision likely to come three days after the vote and could redefine America’s relationship with China. Former President Donald Trump has threatened to impose tariffs on China that could destroy trade between the two largest economies and cut the Asian nation’s annual growth rate in half.
Mr. Liao was a key member of the Chinese trade war negotiating team that confronted U.S. officials during President Trump’s first term. Speaking fluent English, he visited the United States as an aide to then-Vice Prime Minister Liu He and met with President Trump in the Oval Office.
Days after Yellen’s criticism, Liao said Chinese officials had briefed U.S. officials “in great detail on the Chinese considerations” behind recent policies, while U.S. officials said they had no control over their own finances and interest rates. He said he shared his thoughts on the decision.
The Chinese side also “expressed concern” about U.S. tariffs and Russia-related sanctions during bilateral talks this week, the Treasury Department said in a statement.
The Treasury Department confirmed in a statement Friday that the two sides had discussed the stimulus package, without providing details.
“I also emphasized to foreign colleagues at this week’s meeting China’s determination to continue reform and opening up to pursue high-quality development and the measures set by the Third Plenum,” Liao said. He added that the conference is held twice every 10 years. Long-term reforms planned for July.
–With assistance from Viktoria Dendrinou.
(Updated Treasury Department statement on U.S.-China talks.)
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