In a move to bolster its slowing economy, China is poised to unveil a massive fiscal stimulus package next week, totaling over 10 trillion yuan (approximately $1.4 trillion). The Standing Committee of the National People’s Congress (NPC) is set to approve this initiative, which includes the issuance of 6 trillion yuan in special sovereign bonds designed to ease the burden of debt on local governments. This measure, reported by Reuters, could mark a significant shift towards more substantial economic stimulus, especially considering the upcoming US election, where Donald Trump has vowed to increase tariffs on Chinese goods.
Beijing’s renewed focus on stimulus comes amidst heightened global scrutiny of its economic policies. The government has already implemented its most robust monetary measures since the 2020 pandemic and hinted at additional fiscal support. Analysts, speaking to Reuters, believe the 10-trillion-yuan package signifies a more aggressive approach to bolster China’s economy, but emphasize that it remains less extensive than the stimulus package deployed in 2008.
To further alleviate the debt pressure on local governments, the NPC Standing Committee may also approve up to 4 trillion yuan in special-purpose bonds over the next five years. These bonds will be dedicated to land and property acquisitions. If approved in full, this measure could boost the overall fiscal package to over 10 trillion yuan.
China’s central bank, in a bid to support the economy, held its key policy rate steady in October following September’s rate cuts. Last Friday, the People’s Bank of China (PBOC) injected 700 billion yuan ($98.36 billion) through its one-year medium-term lending facility, maintaining the rate at 2.0%. In a separate move, the central bank added 292.6 billion yuan via a seven-day reverse repo at a steady 1.5% rate.
This latest easing cycle began in late September when the PBOC reduced the one-year MLF rate from 2.3% to 2.0% and cut the seven-day reverse repo rate by 20 basis points. The central bank also reduced reserve requirements, releasing 1 trillion yuan for lending purposes. In response to these measures, China’s commercial banks lowered benchmark lending rates by 25 basis points to support the struggling property market.
The proposed fiscal stimulus package highlights the Chinese government’s commitment to supporting its economy, particularly in the face of slowing growth and global uncertainties. It remains to be seen how this ambitious initiative will impact China’s economic trajectory in the long term.
