China approves $837 billion debt package to boost its flagging economy

Latest update:November 08, 2024 02:58 PM IST

Chinese Finance Minister Lan Fo’an said at a news conference on Friday that a debt limit of six trillion yuan would be provided over three years to help regional governments replace their so-called “hidden debt.”

China’s announcement of the stimulus came at the end of a five-day meeting of China’s top legislative body, the Standing Committee of the National People’s Congress. (Representative photo: ANI)

China has approved a six trillion yuan ($837 billion) plan to prop up its weak economy by allowing local governments to swap their hidden debt, and unveiled further stimulus measures to counter a potentially unstable growth path marked by Donald Trump’s impending return to Whitedom. House.

Finance Minister Lan Fo’an said at a news conference on Friday that a debt limit of six trillion yuan would be provided over three years to help regional governments replace their so-called “hidden debt”. This type of debt typically arises from risky local government financing. platforms supported by cities or provinces.

“Since the beginning of this year, under the influence of many factors, central and local budget revenues have not met expectations,” he added.

The statement came at the end of a five-day meeting of China’s highest legislative body, the Standing Committee of the National People’s Congress.

Years of strict pandemic control and a real estate crisis have depleted local government coffers in China, leaving authorities across the country facing huge debts. The problem has become so severe that some cities are now unable to provide basic services and the risk of default is growing.

Lan reported that China had a huge hidden debt balance of 14.3 trillion yuan ($1.99 trillion) at the end of 2023. Officials plan to cut that amount to 2.3 trillion yuan ($320 billion) by 2028.

China’s gross domestic product (GDP) grew just 4.6% in the three-month period from July to September compared with a year earlier. That was only slightly higher than the expectations of economists polled by Reuters, who had forecast growth of 4.5%.

However, at this rate of growth, there is a risk that Beijing may miss its growth target of around 5%. After a dismal economic summer, in the last week of September, leader Xi Jinping finally decided to move forward with a much-needed stimulus package, largely focused on monetary measures.

Economists have since expected up to 10 trillion yuan ($1.4 trillion) of additional stimulus measures to restore optimism in the world’s second-largest economy.