China held a briefing on a plan to allow local governments to refinance their off-balance-sheet debt in Beijing, where the finance ministry announced that a $839 billion worth of debt swap has been approved to rescue local governments.
The briefing comes as top legislators concluded a week-long meeting, a gathering that investors hoped for authorities to roll out stronger economic support to counter the threat of tariffs under a second Donald Trump presidency.
Here are the key highlights of China’s local govt debt swap plan
-China has approved a $839 billion programme to refinance local government debt to support the economy
-China will raise local governments’ debt ceiling to 35.52 trillion yuan, which will allow them to issue six trillion yuan in additional special bonds over three years to swap hidden debt, the Xinhua News Agency reported on Friday. More details are yet to emerge
-The plan approved by the Standing Committee of the NPC is broadly in line with what economists expected as China seeks to curb financial risks and shore up growth.
The new stimulus measures were expected to renew optimism that emerged Thursday after October’s robust exports helped offset concerns over slow investment growth and weak consumption.
These developments come at a time when China’s economy grew 4.6% in the third quarter, the weakest pace since March last year, putting in doubt Beijing’s ability to hit its annual expansion target of around 5%.
That slowdown prompted policymakers to look at more supportive policies, including interest-rate cuts and help for the stock and real estate markets.
The shift in late September triggered a historic stock rally and drove global banks including Goldman Sachs Group Inc. to upgrade their forecasts for the $18 trillion economy.
However, Trump’s election victory has fueled calls on Beijing to strengthen policies to boost domestic demand to offset a potential drop in exports due to the president-elect’s tariff threats.
(With text inputs from Bloomberg)
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