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Beijing Hints At More Fiscal Stimulus After Weak Economic Data


Growth remains sluggish as the housing market downturn and low consumer confidence persist.


Beijing wants to bolster an economic recovery that remains fragile amid sluggish demand, thus state media claimed that the government is considering raising the amount local governments can borrow.


According to state-run Xinhua News Agency on Friday, the Standing Committee of the National People's Congress will meet later this month to discuss a measure assigning more local government debt quotas in advance. The National People's Congress is the Communist Party-controlled parliament that regulates government borrowing.


If the NPC's borrowing caps from March's government budget are lifted, local governments would be able to borrow more money this year. By the end of September, local governments were expected to have issued all of their allotted "special purpose" bonds, which are mostly used for infrastructure spending, leaving open the question of how fiscal stimulus would be funded by the end of the year.


Consumer inflation in China dropped to zero in September, according to government figures, indicating sluggish demand in the economy. The growth of Chinese banks' loan portfolios slowed in September compared to the same month a year earlier, according to data from the People's Bank of China. Recent credit expansion can mostly be attributed to increased issuing of government bonds.


Beijing has been widely expected to increase fiscal stimulus, despite economists' consensus that China will achieve its GDP growth target of approximately 5% for this year. Growth remains sluggish as the housing market downturn and low consumer confidence persist.


An unprecedented approach, as reported by Bloomberg News earlier this week, would be for Beijing to revise its budget to allow the issuing of extra sovereign bonds. Without adjusting the budget for this year, more bonds could be issued this year if local governments were allowed to spend some of 2024's debt quota in advance.

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