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Amanda Lee

The window for a fiscal expansion to aid in China’s economic recovery might be narrower than previously thought, analysts said, as any new round of stimulus would need to be approved by the nation’s top legislature – a body whose governing committee has a meeting scheduled for later this month.
Officials of the National Development and Reform Commission (NDRC), the country’s foremost economic planner, said on Tuesday they would speed up government spending while largely reiterating plans to boost investment and increase direct support for low-income groups and new graduates.
The commission also affirmed China would continue to issue ultra-long-term treasury bonds next year to support major projects and implement a 100 billion yuan (US$14.14 billion) investment for strategic areas this year rather than 2025, as initially arranged.
Local governments will complete this year’s issuance of the remaining local government special bond quota of about 290 billion yuan by the end of October, NDRC officials said, adding development of these projects will be accelerated.
But the planners also warned local governments against “illegally” imposing fines, carrying out random inspections or seizing assets, stressing the need to create a “positive” environment for the private sector.
Their comments came as analysts have projected the central government would need to lift this year’s fiscal budget ratio above the current 3 per cent proportion to gross domestic product, as sluggish land sales and declining tax revenue have widened the deficit. China has set a GDP growth target of “around 5 per cent” this year.


Taking into account the sharp fall in land sales – traditionally local governments’ biggest moneymaker – actual revenue this year could be 3.4 trillion yuan less than what was budgeted, according to estimates by Zhang Deli, chief macro researcher at Zhongtai Securities.
But changes to the ratio need to be approved by the National People’s Congress Standing Committee, due to meet in the second half of October.
Yue Su, principal China economist at the Economist Intelligence Unit, said the government might arrange 1 trillion to 3 trillion yuan in fiscal support this year and next to boost the economy, recapitalise banks and stabilise the property market.
“This, along with investments from special long-term bonds planned for next year, is expected to primarily impact 2025’s economic growth,” Su said.
Given Beijing’s concerns over local government debt, some analysts believe the room for massive fiscal stimulus is limited.
“We should not expect too much from follow-up fiscal policy this year. The key to fiscal policy this year lies in the easing of fiscal constraints rather than an increase in stimulus,” said Zhu Qibing, chief macro analyst at Bank of China International China in a note on Monday.
“We believe that local government debt risk is still a constraint on fiscal expansion to a certain extent.”
It is unrealistic to expect increased government spending while reducing taxes and fees
Ding Shuang, Standard Chartered
The debt ratio of the central and local governments might have hit 56 per cent of GDP by the end of 2023, estimated Ding Shuang, chief Greater China economist with Standard Chartered.
That ratio, if it included the “hidden debt” of local governments, could climb to about 100 per cent by the end of this year, Ding said in a note on Saturday.
“It is unrealistic to expect increased government spending while reducing taxes and fees,” he said. “Ultimately, sustainable growth should be achieved through structural reforms, improving market access, promoting fair competition, protecting property rights, stimulating investment enthusiasm in the private sector and increasing employment opportunities.”


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For maximum effect, observers say, a fiscal expansion to boost China’s economy will need to come soon if it is to come at all


For maximum effect, observers say, a fiscal expansion to boost China’s economy will need to come soon if it is to come at all.


China’s space for fiscal stimulus could be limited amid debt woes: analysts

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}For maximum effect, observers say, a fiscal expansion to boost China’s economy will need to come soon if it is to come at all

For maximum effect, observers say, a fiscal expansion to boost China’s economy will need to come soon if it is to come at all