China Considers $1.4 Trillion Stimulus Package to Revitalize Its Economy
China is reportedly considering a significant financial stimulus plan that could involve over 10 trillion yuan (approximately 1.4 trillion dollars) in additional debt issuance in the coming years to revive its weakening economy. According to sources familiar with the matter, the proposal is expected to be approved next week.
The anticipated financial package may gain additional momentum if Donald Trump wins the presidential election on November 5. Analysts have provided insights into the potential impact of China's stimulus plans.
The Chief Economist for Greater China at ING in Hong Kong stated that a package of 10 trillion yuan would likely meet investor expectations. Song noted that the proposed figures are in line with forecasts for fiscal stimulus ranging between 2 trillion and 4 trillion yuan annually.
Song emphasized that allocating 6 trillion yuan for local government bonds and 4 trillion yuan for real estate purchases and land rehabilitation represents a significant commitment to support the real estate market. This is particularly noteworthy if the funds are rapidly deployed to reduce housing inventory, which has declined after peaking in February of this year.
Song also pointed out that the financial stimulus may not have as strong a multiplier effect as previous infrastructure-focused packages. However, it addresses two major challenges in the Chinese economy, and its approval could be positively received by the market. Future policy measures are likely to focus on boosting consumption, which has been a recurring theme in recent policy briefings.
The Head of North Asia Equity Advisory at UBP in Hong Kong mentioned that the proposed figure is on the higher end but still within market expectations. He emphasized that the market is looking for a definitive number for the financial package, indicating that successful implementation will depend on factors such as monetary transmission and consumer purchasing power.
If approved, this stimulus plan could represent one of China's most significant efforts to counter economic pressures amid global economic challenges and promote growth.