(Deutsche Welle Chinese website) In order to save China’s underperforming economy, the Chinese government approved on Tuesday (October 24) the issuance of an additional RMB 1 trillion in government bonds and raised the deficit target. This is the first time in more than 10 years that China has made an announcement at the “Two Sessions”. Modify the budget outside of the time. At the same time, foreign media also revealed that Chinese President Xi Jinping inspected the Central Bank of China and the State Administration of Foreign Exchange for the first time on Tuesday, aiming to boost confidence.
According to reports from China’s official Xinhua News Agency, the Standing Committee of China’s National People’s Congress passed a resolution on the 24th that the State Council will increase the issuance of treasury bonds and adjust the 2023 central budget plan. In the future, the central government will issue an additional 1 trillion yuan of 2023 government bonds in the fourth quarter of this year, and all the additional government bonds will be arranged to local governments through transfer payments to support the “post-disaster recovery and reconstruction” of this year’s floods.
The report also said that China’s Ministry of Finance manages this amount as special treasury bonds and plans to use 500 billion yuan this year and carry forward another 500 billion yuan to next year. China’s fiscal deficit will increase from RMB 3.88 trillion to RMB 4.88 trillion, and the deficit rate is expected to increase from 3% to about 3.8%.
Although the official name is to support flood reconstruction, most outsiders believe that this is a new fiscal stimulus measure to support China’s economic recovery.
The last time China adjusted its budget outside of the two sessions was in 2008. At that time, the Chinese government raised RMB 1 trillion through local government financing, bank loans, residents’ donations and other channels for the reconstruction of the Wenchuan earthquake-stricken areas. Later, Chinese officials also announced an economic stimulus plan totaling RMB 4 trillion that year to boost domestic demand and help avoid a global economic recession.
Rare fiscal stimulus policy
Reuters quoted some policy insiders and economists as saying that some government advisers had previously suggested that China’s budget deficit target for 2024 could be raised to more than 3% of gross domestic product (GDP) set this year, which would It will help the Chinese government issue more bonds to revive the sluggish economy.
An unnamed cabinet adviser told Reuters, “We need to prepare for next year and implement growth policies. The foundation for economic recovery is not solid.” The person also said, “Next year, we should still Set a GDP growth target of 5%.”
Some policymakers also pointed out that the recovery will be limited due to the impact of China’s political environment. Chinese officials have tightened their control over the economy, including the private sector.
“We should push for reforms because many of the problems are structural, but reforms are difficult to implement and require political will,” a policy insider told Reuters.
Do stimulus policies work?
The Wall Street Journal reported that some economists said the stimulus bill sent an unusual signal that the central government was willing to take on the responsibility of funding infrastructure. Over the past few decades, this task has mostly been left to local governments.
Yao Wei, chief Asia economist at Societe Generale, pointed out that China’s real estate bubble burst has exacerbated the funding gap of local governments, because local governments have long relied on land sales as their main source of revenue.
This is a big deal, she said, “at least Beijing has recognized the structural fiscal constraints faced by local governments.”
Zhu Min, a former deputy governor of the People’s Bank of China who also served as deputy managing director of the International Monetary Fund (IMF), told Bloomberg that China’s just-launched stimulus package will boost new sectors of the economy while preventing funds from flowing into troubled real estate. industry.
“The plan is not big, but I think the impact will be big,” Zhu said, because it focuses on climate change and other projects that will become “competitive areas” for the world’s second-largest economy.
However, Hu Weijun, chief economist for Greater China at Macquarie Group in Australia, pointed out that although the new stimulus measures will help China maintain a 10% growth rate in infrastructure investment this year, it will not reach the previous level. The type of stimulus many economists say China desperately needs: a direct or indirect boost to household consumption.
Xi Jinping inspects central bank for first time
While the Chinese government is increasing its issuance of national debt and revising its budget, foreign media also disclosed another rare situation: Xi Jinping is believed to have personally inspected the People’s Bank of China (China’s central bank) on the 24th, the first time since he took office more than 10 years ago.
Bloomberg quoted people familiar with the matter as saying that this highlights that the Chinese government attaches greater importance to supporting the economy and financial markets.
Xi Jinping, Chinese Vice Premier He Lifeng and other government officials visited the People’s Bank of China and the State Administration of Foreign Exchange in Beijing on Tuesday afternoon, the person said. People familiar with the matter added that Ho Lifeng also visited the country’s sovereign wealth fund.
The purpose of Xi Jinping’s inspection of the central bank is currently unclear to the outside world. Reuters could not immediately reach the People’s Bank of China and the State Administration of Foreign Exchange for comment.
According to public records, Xi Jinping has never visited China’s central bank before. In the past, such inspections were usually led by the Chinese Prime Minister or a deputy prime minister.
In addition, a person familiar with the matter told Bloomberg that one of the purposes of Xi Jinping’s visit to the State Administration of Foreign Exchange is to better understand how China’s US$3 trillion in foreign exchange reserves are used.
After news of China’s fiscal stimulus measures and Xi Jinping’s inspection of the central bank came out, both the Chinese stock market and the Hong Kong stock market rose in early trading on Wednesday (October 25).
(Xinhua News Agency, Reuters, Bloomberg, Wall Street Journal)
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2023-10-25 07:26:00
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