Analysts cautiously welcome China’s fiscal stimulus announcement, but details needed for full assessment

China Announces Fresh Fiscal Stimulus to Revive Economy, Analysts Urge Caution

In a move to boost its struggling economy, China announced on Saturday a new round of fiscal stimulus measures, including issuing special bonds to increase capital available to banks and allowing local governments to borrow more. While the announcement was met with cautious optimism by analysts, they emphasized the need for more specific details and headline figures to fully assess the impact of the stimulus.

The recent measures, which also include interest rate cuts and liquidity injections for banks, are aimed at jumpstarting China’s economy, which has been grappling with sluggish growth. Despite official claims that the government’s growth target of around five percent for this year is achievable, economists have stressed the importance of a robust fiscal stimulus program to drive domestic spending and facilitate a post-pandemic recovery.

Heron Lim of Moody’s Analytics highlighted the absence of specific numbers in the announcement, noting that investors may be hesitant until more concrete details are provided. While the measures unveiled at the news conference were not as substantial as some had hoped for, officials’ comments on expanding central support for the economy were seen as a positive step.

Finance Minister Lan Fo’an mentioned the acceleration of treasury bond issuance and an increase in the debt ceiling for local governments, signaling a potential shift in Beijing’s fiscal policy approach. However, the ultimate impact of these policies will depend on their size and composition, details that have yet to be disclosed.

The focus of the news conference was also on efforts to address local government debt and promote long-term structural changes. Analysts noted the importance of derisking local governments and implementing measures to support growth drivers in China. Despite challenges such as sluggish consumption and high youth unemployment, experts emphasized the need for a more robust fiscal commitment to boost confidence and stimulate economic growth.

As Beijing continues to work on finalizing the details of its fiscal stimulus package, analysts are closely monitoring the developments to gauge the potential impact on China’s economic outlook. More clarity on the size and implementation of the stimulus measures will be crucial in determining their effectiveness in reviving the economy.