Instant view: Investor reactions to briefing from China’s finance ministry on stimulus
2024.10.11 23:51
SINGAPORE (Reuters) – China said on Saturday it will “significantly increase” government debt issuance to offer subsidies to people with low incomes, support the property market and replenish state banks’ capital as it pushes to revive sputtering economic growth.
Without providing details on the size of the fiscal stimulus being prepared, Finance Minister Lan Foan told a news conference there will be more “counter-cyclical measures” this year.
Global financial markets have been keenly awaiting more details on China’s stimulus plans, fearing its 2024 economic growth target and longer-term growth trajectory may be at risk if more support is not announced soon.
Here are some comments from investors and analysts on the press briefing from China’s finance ministry:
RONG REN GOH, PORTFOLIO MANAGER, EASTSPRING INVESTMENTS, SINGAPORE
“Investors were hoping for fresh stimulus, accompanied by specific numbers, to be announced at the MoF presser, including the size of these commitments. From this perspective, it turned out to be somewhat of a damp squib given only vague guidance was provided.
“That said, there were meaningful measures announced. The MoF affirmed room for the central government to increase debt, more support for housing markets, and increased local government debt quotas to alleviate refinancing woes.
“However, with markets focused on ‘how much’ over ‘what’, they were invariably set up to be disappointed by this briefing.”
HUANG XUEFENG, CREDIT RESEARCH DIRECTOR, SHANGHAI ANFANG PRIVATE FUND CO, SHANGHAI
“The focus seems to be around funding the fiscal gap and solving local government debt risks, which far undershoots expectations that had been priced into the recent stock market jump. Without arrangements targeting demand and investment, it’s hard to ease the deflationary pressure.”
ZHAOPENG XING, SENIOR CHINA STRATEGIST, ANZ, SHANGHAI
“MoF focused more on derisking local governments. It will likely add new quotas of treasury and local bonds. We expect a 10 trillion yuan ($1.42 trillion) implicit debt swap in the next few years. Official deficit and local bond quotas may both increase to 5 trillion yuan going forward. But it looks (to be) not much this year. We expect 1 trillion ultra-long treasury and 1 trillion local bonds to be announced by NPC this month end.”
($1 = 7.0666 renminbi)
