China’s space for fiscal stimulus could be limited amid debt woes: analysts

For maximum effect, observers say, a fiscal expansion to boost China’s economy will need to come soon if it is to come at all

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A fiscal expansion to boost China’s economy is viewed by many analysts as necessary, but room to execute such a change is limited. Photo: Bloomberg

Published: 8:30am, 9 Oct 2024Updated: 9:43am, 9 Oct 2024

The window for a fiscal expansion to aid in China’s economic recovery might be narrower than previously thought, analysts said, as any new round of stimulus would need to be approved by the nation’s top legislature – a body whose governing committee has a meeting scheduled for later this month.

Officials of the National Development and Reform Commission (NDRC), the country’s foremost economic planner, said on Tuesday they would speed up government spending while largely reiterating plans to boost investment and increase direct support for low-income groups and new graduates.

The commission also affirmed China would continue to issue ultra-long-term treasury bonds next year to support major projects and implement a 100 billion yuan (US$14.14 billion) investment for strategic areas this year rather than 2025, as initially arranged.

Local governments will complete this year’s issuance of the remaining local government special bond quota of about 290 billion yuan by the end of October, NDRC officials said, adding development of these projects will be accelerated.

But the planners also warned local governments against “illegally” imposing fines, carrying out random inspections or seizing assets, stressing the need to create a “positive” environment for the private sector.

Their comments came as analysts have projected the central government would need to lift this year’s fiscal budget ratio above the current 3 per cent proportion to gross domestic product, as sluggish land sales and declining tax revenue have widened the deficit. China has set a GDP growth target of “around 5 per cent” this year.

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