Chinese President Xi Jinping has issued additional sovereign debt and raised the budget deficit ratio to support the world's second-biggest economy, with even making an unprecedented visit to the central bank.
China’s legislature approved a plan to raise the fiscal deficit ratio for 2023 to about 3.8% of gross domestic product
Chinese President Xi Jinping has issued additional sovereign debt and raised the budget deficit ratio to support the world's second-biggest economy, with even making an unprecedented visit to the central bank.
The nation’s legislature approved a plan to raise the fiscal deficit ratio for 2023 to about 3.8% of gross domestic product. The plan includes issuing additional sovereign debt worth 1 trillion yuan ($137 billion) in the fourth quarter to support disaster relief and construction, according to a report by Bloomberg.
The changes came during a spree of announcements from the Standing Committee of the National People’s Congress, the Communist Party-controlled parliament that oversees government borrowing.
The revision underlined concerns among top leadership about the economy’s outlook into next year and the government’s increased focus on shoring up the economy and financial markets.
Economists at Citigroup Inc had earlier said a move beyond the usual debt-to-GDP target “could show a greater sense of urgency of the policymakers” as they push to reach that growth goal.
The stronger-than-expected data for the third quarter has led authorities to say they are “very confident” in the economy’s ability to achieving its target of 5 per cent growth this year. However, several challenges are likely to persist into 2024, including problems stemming from ongoing property market turmoil and deflationary pressures. Economists expect growth to slow to 4.5% next year.
Financing infrastructure investment through sovereign bond issuance is also likely to reflect a shift in policy thinking by putting more of the fiscal burden on the central government, rather than local authorities who are running out of room to leverage up. The central government will transfer funds from the additional borrowing to local authorities to use in projects this year and next.
Legislators also renewed through 2027 an authorisation for the State Council, China’s cabinet, to front-load some of next year’s local bond quota. Zhao urged for an acceleration in the issuance new local government notes and the use of the funds raised.