China investors hope for a $283M stimulus from the capital over the weekend

Strategists, economists, and fund managers project new fiscal stimulus over the next six months if China’s Finance Minister Lan Fo’an fails to address the expected $283B stimulus in the anticipated briefing this Saturday.

Bloomberg reported that China was gearing up for a huge economic boost as investors anticipated a crucial announcement on Beijing’s fiscal stimulus. China’s Finance Minister Lan is reportedly set to host a press conference this weekend to reveal the government’s plans to revamp the world’s second-largest economy.

Polled analysts expected a consumption boost and local debt relief through fiscal stimulus measures. The 23 survey participants predicted the funding to come from government bond sales. 

Targeted stimulus reveals the government’s commitment to economic revival

Investors and analysts are expecting China to deploy as much as $283 billion in fresh fiscal stimulus at a highly anticipated briefing on Saturday, according to a majority of 23 market participants surveyed by Bloomberg https://t.co/icmi3jLWqE

— Bloomberg (@business) October 11, 2024

The support target would reportedly indicate where Beijing aimed to steer China’s economy. This will be crucial, especially after prolonged debt-fueled expansion through investment in infrastructure and real estate. A targeted stimulus injection will be critical to increasing investor confidence and addressing the challenges posed by the country’s slow economy. 

Investors were equally focused on target areas of support, with experts believing that a well-targeted approach will be essential for China’s sustainable economic growth.

Pushan Dutt, a professor of economics at INSEAD, emphasized the shift of stimulus focus from real estate to households. He argued that boosting social welfare and consumer spending will be more effective in stimulating the economy and creating long-term stability.

“It is the focus of the stimulus rather than the size that is important.”

–Pushan Dutt 

The upcoming press conference follows a series of Chinese government economic support measures, including stock market interventions, interest rate cuts, and property market incentives. 

Ding Shuang, chief economist for Greater China and North Asia at Standard Chartered Plc, observed that government agencies needed to “feel the pulse” of the market before any policies were published. Four respondents anticipated a stimulus package exceeding 3 trillion Yuan.

China’s post-pandemic recovery includes boosting consumer spending

Vivian Lin Thurston, partner and portfolio manager at William Blair, said a key focus of the stimulus was expected to boost consumer spending. She pointed out the Chinese government could consider implementing subsidies for targeted groups, a social safety net, consumption vouchers, and subsidies for consumer goods and cars. 

China sought to rebalance the economy and reduce its reliance on exports by stimulating consumption amid rising trade tensions. Beijing was refraining from direct large-scale handouts due to concerns over “welfarism.”

Fiscal policy in 2024 has so far been a drag on China’s economy, as broad budget spending shrunk by 3% in the first eight months compared to a year earlier. 

China was planning to raise nearly 9 trillion yuan through government bond sales with the National People’s Congress or its executive body, the Standing Committee, being charged with approving any new quota above the budgeted amount. 

Experts suggested that China should focus on quality projects and consider alternative approaches. Some approaches included the government’s relaxing restrictions on using special local bonds for building and land buybacks.