China stimulus aims at its greatest wall of debt
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Chan Ka Sing
HONG KONG, Oct 14 (Reuters Breakingviews) -The finance ministry pledged to tackle local government borrowings. It reveals an intent to smash systemic financial risk and, by not rushing to support consumer demand, a desire not to repeat past spending mistakes. Beijing's plan is welcome but it is still missing key details.
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The Ministry of Finance on Oct. 12 announced four major “countercyclical” fiscal measures to boost growth. There will be a one-time, large-scale expansion of a debt swap programme that allows local governments to issue special bonds to replace implicit debts.
Local governments will also be allowed to sell more bonds to buy land and housing units from developers. Meanwhile, Beijing will sell more special sovereign debt to recapitalise banks. The central government also pledged to increase support for low-income individuals and students to boost consumption.
Finance Minister Lan Foan said the central government has a “relatively large” amount of room to increase its deficit and to issue more debt. He also said more fiscal stimulus is being studied by the ministry.
Editing by Una Galani and Ujjaini Dutta
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