China's Investors Left Disappointed as Finance Ministry Forgoes Comprehensive Stimulus Plan

China’s Ministry of Finance held a much-anticipated press conference on Saturday but did not announce a wide-ranging fiscal stimulus package that many investors were hoping for. Instead, the ministry focused on addressing local government debt and issues within the property market, areas that are crucial for the country’s economic stability.

The Expectations

Before the conference, analysts were optimistic that the Ministry of Finance would unveil measures to revitalize the economy. Many expected an increase in the fiscal deficit ratio from the current 3 percent, more issuance of ultra-long special treasury bonds, and some form of tax reductions.

Actions Announced

During the one-hour conference, several measures were proposed to assist local governments and strengthen the financial system. These included raising debt limits, utilizing unused government bond quotas, offering fiscal support for the struggling property market, and replenishing capital for key state-owned banks.

Support for Local Governments

The finance minister, Lan Foan, indicated that local governments could access a total of 2.3 trillion yuan (approximately US$325.3 billion) in special bond funding during the last quarter of the year. This funding is expected to help alleviate some of the pressures local governments face.

Debt Reduction Measures

In an important move to address hidden debts, the central government will implement a one-time, significant debt ceiling increase. The minister described this as the most substantial initiative for debt reduction in recent years.

Focus on the Property Sector

Additionally, deputy finance minister Liao Min shared that local governments will be permitted to use special bonds to buy idle land and commercial properties from developers who are currently facing difficulties.

Investor Reaction

China, Investors, Stimulus