Beijing, China – October 16, 2024 – China’s Ministry of Finance is set to roll out a comprehensive package of targeted policy measures aimed at stabilizing economic growth, expanding domestic demand, and mitigating financial risks. The new policies will primarily focus on supporting local governments, revitalizing the property market, and enhancing the credit capacity of major banks.
Finance Minister Lan Fo’an announced during a recent press conference that the government is committed to strengthening local governments’ financial positions, particularly in addressing debt risks. This includes significantly increasing debt quotas and facilitating the mitigation of hidden debts.
“This policy push is designed to equip local governments with the necessary financial resources and policy flexibility to drive development and safeguard people’s livelihoods,” Lan stated. Notably, the measures will include a substantial increase in the debt swap quota, allowing for the one-time replacement of significant amounts of hidden local government debt.
Lan emphasized that this initiative represents the most substantial debt resolution support policy introduced in recent years, expected to provide crucial assistance to local governments in managing their debt levels.
By the end of last year, the balance of hidden debts reported on the government’s debt information platform had dropped by 50% compared to 2018 levels, indicating improved control over debt risks. The ministry is also exploring the possibility of the central government taking on more debt and increasing its fiscal deficit.
To support the real estate sector, policymakers will integrate the use of local government special-purpose bonds, dedicated funds, and tax policies. This strategy aims to stabilize and uplift the struggling property market. Vice-Minister of Finance Liao Min noted the importance of reclaiming idle land using special-purpose bonds and facilitating new land reserve projects.
The ministry is also planning to allow special-purpose bonds to fund the purchase of existing commercial properties for conversion into affordable housing. This shift will optimize the approach to government-subsidized housing projects by focusing on existing housing stock rather than solely on new construction.
Additionally, the ministry is reviewing tax policies, including value-added taxes, to better align with housing market standards and enhance the stable development of the real estate sector.
Furthermore, China is expected to issue special treasury bonds to assist state-owned commercial banks in replenishing their Tier-1 core capital. This move aims to bolster the banks’ risk resilience and enhance their credit extension capabilities, ultimately better serving the real economy.
These measures signal a proactive approach by Chinese authorities to address pressing economic challenges and promote sustainable growth in the face of mounting financial pressures.