China Market Update: Reuters’ RMB 10 Trillion Stimulus Article Lifts US-Listed China Stocks Pre-Market
Brendan Ahern
Senior Contributor
I am the CIO of KraneShares, a China-focused ETF provider.
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Oct 29, 2024,10:02am EDT
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Asian equities were mixed overnight despite another strong US dollar move against regional currencies, as Mainland China, Taiwan, and the Philippines underperformed.
The most important news item occurred after the market close as Reuters reported the NPC will approve RMB 10 trillion ($1.4 trillion) of fiscal stimulus, the equivalent to 8% of GDP via special bond issuance, sending US-China ADRs higher pre-market. The bond issuance would:
Be spread out over three years with RMB 6 trillion of “the proceeds primarily being used to help local governments address off-the-books debt risk”
“4 trillion worth of special-purpose bonds for idle land and property purchases over the next five years”
A separate RMB 1 trillion “as a consumption boost including trade-in and renewal of consumer goods”
“Another trillion to bolster banks’ balance sheets"
Go big or bear the risk of watching China’s economy fall off a cliff, says prominent head of fiscal academy associated with Ministry of Finance
China should take unconventional action to prevent a worst-case scenario in which the economy could “fall off a cliff”, as there are signs of a fundamental shift in Beijing’s understanding of debt and deficits as well as in policymakers’ mindset on macroeconomic risks and stimulus packages, according to a prominent economist with close ties to the finance ministry.
The comments by Liu Shangxi, head of the Chinese Academy of Fiscal Sciences, affiliated with the Ministry of Finance, came after the central leadership’s decision to implement a slew of incremental policy support measures, and amid fervent debate and speculation about the state of the economy and Beijing’s resolve in the absence of a headline-grabbing stimulus figure like what was seen in 2008.
