KURE - China unveils fresh stimulus but economic growth fears linger

2023-10-25 06:33:31 ET

China has rolled out fresh stimulus to prop up its struggling economy, with its top parliament body clearing a CNY 1T ($136.66B) sovereign bond issue, although concerns remained over its wider impact on growth.

The move, which will push China's 2023 budget deficit ratio to ~3.8% from 3%, is expected to support rebuilding of disaster-hit areas and improve disaster relief infrastructure. A total of CNY 500B ($68.33B) will be used this year, and the remaining will be carried over to 2024.

"The package is not huge, but the impact will be big," Zhu Min, a former deputy governor of the People's Bank of China, told Bloomberg. He called the stimulus "sectoral, earmarked, clear structure-oriented," aimed at benefiting industries that Beijing wants to replace old economic drivers like the property sector, which is currently in crisis.

Beijing also passed a bill to allow local governments to frontload part of their 2024 bond quotas, which will help maintain steady investment and expand domestic demand.

The SSE Composite Index ( SHCOMP ) initially rallied 1% after the moves were announced, but later pared gains to close up 0.4% . The CSI 300 Index ( SHSZ300 ) rose 0.5% .

"China was expected to meet this year's growth target of around 5%," said UBS chief economist Paul Donovan. "The rush to stimulate at this point suggests concern about growth momentum in 2024, or a worry that living standard reality is not as good as the reported GDP figures imply."

The moves also come a day after Chinese sovereign fund Central Huijin Investment bought local ETFs, with plans to continue doing so.

More China stimulus

• China injects record short-term cash
• China central bank bolsters liquidity support
• China sovereign wealth fund raises stake in 'Big Four' banks
• China eyes stabilization fund to boost weakening stock market

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