China has announced a $28 billion investment in local government projects this year in an effort to meet its economic growth targets. The announcement was made by the National Development and Reform Commission (NDRC) in Beijing, disappointing investors who were hoping for a larger stimulus package. Despite concerns over weak economic data, the NDRC chairman expressed confidence in achieving the country’s development goals and maintaining stable growth. To help struggling local governments with debt, Beijing will allocate $14 billion from the central government’s budget and an additional $14 billion for investment projects.
Economists were anticipating additional fiscal measures of around $285 billion to be announced after Chinese leader Xi Jinping approved a growth plan in September. The lack of details on new fiscal measures disappointed investors who were expecting a stronger stance on stimulating growth. While monetary policy measures have been focused on, fiscal measures, such as taxation and public spending, are also needed to support economic recovery. The lack of a significant announcement led to a drop in stock prices in Hong Kong and mainland China.
Many economists believe that more needs to be done to restore consumer confidence and encourage spending. Some experts, such as Jia Kang, suggest issuing $1.4 trillion in long-term government bonds to fund infrastructure and public works projects. This level of stimulus is seen as necessary by some economists to turn around the economy, given China’s history of successful stimulus measures in the past. The People’s Bank of China has already taken steps to reduce interest rates, lower mortgage rates, and support the property sector and stock market.
To further boost confidence, the government announced cash handouts to disadvantaged citizens and subsidies for recent graduates struggling to find employment. The ruling Communist Party’s Politburo also dedicated a meeting to economic affairs, acknowledging new challenges in the economy and committing to increased fiscal spending, stabilization of the property market, and improved employment opportunities for graduates and migrant workers. The ongoing measures are aimed at supporting economic growth and addressing the various challenges facing China’s economy.
Overall, China’s efforts to stimulate economic growth and address the challenges of weak economic data, high debt levels, and declining consumer confidence are ongoing. While the government has taken steps to support local government projects and reduce interest rates, more fiscal measures may be needed to sustain growth in the long term. The optimism from policymakers and moves to address key issues like unemployment and the property sector reflect a commitment to maintaining stability and promoting economic development in the country.
