<a href="http://www.world-today-news.com/china-pressures-asean-ahead-of-important-south-china-sea-negotiations/" title="China Pressures ASEAN Ahead of Important South China Sea Negotiations”>Beijing. China on Friday unveiled a 10 trillion yuan ($1.40 trillion) debt package to ease financing strains on local governments and stabilize weakening economic growth, as it faces fresh pressure from Donald Trump’s return to office. White House.
The measures mark a shift away from the all-out stimulus strategies to revive growth that China has deployed in the past and seek to repair municipal balance sheets as a longer-term goal, rather than directly injecting money into the economy.
Finance Minister Lan Foan said more stimulus is coming, and some analysts said Beijing may not want to spend all its ammunition before Trump officially takes power in January.
In an apparent reaction to the US elections and intensifying risks to trade, the state media CCTV reported that the Chinese cabinet approved expanding export credit insurance coverage and will intensify support for commercial enterprises.
For now, however, investors speculating on a fiscal bazooka may be disappointed.
“I don’t see anything that exceeds expectations,” said Huang Xuefeng of Shanghai Anfang Private Fund Co in Shanghai. “It’s not huge if you look at fiscal deficits. The money is used to replace hidden debts, which means it doesn’t create new workflows, so supporting growth isn’t as direct.”
Local governments, facing high debt and falling revenues, have cut civil servants’ salaries and racked up debts to private sector companies, stifling money flows into the real economy and stoking deflationary pressures.
Their tensions, stemming from a serious real estate crisis since 2021 that decimated income from auctions of residential land to developers – a key source of funds for cities and provinces – had jeopardized China’s growth target for 2024, close to 5 percent.
China’s long-term prospects are further clouded by Trump’s threat to impose tariffs exceeding 60 percent on all Chinese goods, which has rattled Chinese manufacturers and accelerated the relocation of factories to Southeast Asia and other regions. .
Exporters say the tariffs will further reduce profits, harming employment, investment and growth. They would also exacerbate China’s industrial overcapacity and the deflationary pressures it fuels, analysts say.
The package of measures, presented at the end of a week-long parliamentary meeting, includes increasing the debt quota of local governments by 6 trillion yuan over the next three years. It also gives the green light to municipalities to use another 4 billion over five years in emissions that Beijing had already approved for the same purpose.
Beijing uses the term “hidden debt” to refer to the shadow loans, bonds and credits of local government financing vehicles.
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