China's Anticipated Fiscal Stimulus: Boosting Economy and Addressing Debt Risks

China is expected to unveil a highly anticipated fiscal stimulus package this week, aimed at bolstering its flagging economy and addressing long-standing debt risks. The package, to be announced at the end of the ongoing legislative meeting, is anticipated to include bold, multi-trillion yuan measures to reinvigorate the world's second-largest economy.

The Chinese economy has shown signs of life in recent months, with auto sales rebounding and exports surging. However, analysts caution that more needs to be done to achieve a sustained recovery. The government has indicated that the upcoming fiscal stimulus package will address these concerns, focusing on key areas such as infrastructure investment, debt alleviation, and property market stabilization.



One of the primary focuses of the stimulus package is debt alleviation for local governments. The Ministry of Finance has announced plans to increase the debt ceiling on a relatively large scale in a lump sum, replacing existing hidden debts and helping defuse debt risks. This move is expected to reduce the pressure on local governments to dissolve debts, freeing up more resources for economic development and boosting business confidence.



Additionally, the package is expected to include targeted fiscal policy tools to support the property market. Local governments will be supported in using special-purpose bonds to reclaim idle land or expand land reserves, as well as purchasing existing commodity houses for affordable housing. These measures aim to address the property market's sluggishness and restore confidence among consumers and businesses.

Furthermore, the stimulus package is expected to include measures to enhance the risk resilience and lending capacity of large state-owned commercial banks. The government plans to issue special treasury bonds to bolster the core tier-1 capital of these banks, enabling them to better serve the development of the real economy.

The upcoming fiscal stimulus package is a critical step in China's efforts to achieve its economic growth target of around 5% this year. By addressing debt risks, supporting key sectors, and fostering a more balanced economic growth model, the government seeks to rebalance the economy and mitigate global trade tensions.

As the world's second-largest economy, China's economic performance has significant implications for the global economy. The success of the anticipated fiscal stimulus package will be closely watched by investors and economists alike, as it could set the tone for global economic recovery and growth.