2023-11-05 17:59:18
The new Minister of Finance wants to support domestic consumption and real estate.
Debt the country a little more to stimulate activity. This has been the Chinese mantra for several weeks. As the new Finance Minister, Lan Foan, was appointed on October 24, during a major cabinet reshuffle, Beijing announced its intention to issue more sovereign bonds.
On Sunday, Lan Foan indicated that China would accelerate these new issues of Treasury bills. In “a complex national and international situation”, the Ministry of Finance will focus on the risk linked to local government debt and try to take better advantage of the new bonds to stimulate the economy. He will also strive to improve the efficiency of fiscal policy, reports the state-run Xinhua news agency.
Consolidate the recovery
A 61-year-old technocrat with little experience in central government, Lan Foan took office in a delicate context. President Xi Jinping hopes to stimulate domestic consumption and consolidate the recovery of the world’s second largest economy, penalized for months by a slow post-Covid recovery.
At the end of October, his government broadcast proactive signals regarding the budget deficit and public debt. Additional sovereign bond issues worth 1,000 billion yuan, approximately 130 billion euros, have been announced. Funds must be allocated to programs to rebuild disaster areas or prevent flooding.
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“It is rare for central government plans to be revised outside of the usual budget cycle. This reflects concern regarding short-term growth. then underlined the analysts at Capital Economics. “Chinese authorities needed to pay more attention to growing debt at the subnational level and in local financing vehicles. They should work to reduce the country’s long dependence on real estate. underlined for his part Vitor Gaspar, director of fiscal affairs of the IMF, in mid-October, in Marrakech.
An official meeting devoted to the country’s finances was organized on October 30 and 31, reports the Chinese press. But between the risks linked to the debt of local authorities and the worsening real estate crisis and the desire to revive economic activity, the Chinese authorities sometimes seem to be evading.
Relaxed loan granting rules
Beijing has authorized certain local governments to issue in advance bonds normally scheduled for 2024, in order to meet certain needs, the new Minister of Finance indicated on Sunday.
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At the same time, to allow the real estate sector, which contributes up to 15% of GDP, to participate in the recovery of the economy, the financial regulatory authority is reportedly in the process of relaxing loan granting conditions. . The National Financial Regulatory Administration has reportedly reduced its requirements, particularly regarding banks’ exposure to mortgage loans.
In the third quarter, the Chinese economy performed better than analysts expected. As a result, the government’s growth target of 5% for the whole year might be achieved. But headwinds persist, between the real estate crisis and the reluctance of private companies to spend in a context of low confidence. Several economists therefore anticipate a more marked slowdown in activity in 2024 than in 2023.
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