China Announces Monumental $1.4T Stimulus Package to Address Local Government Debt
China announced a massive $1.4 trillion economic stimulus package on Friday, marking a significant move to address mounting local government debt problems as Beijing grapples with a struggling economy following Donald Trump’s election victory.
The five-year package, totaling 10 trillion yuan, represents China’s most substantial fiscal intervention aimed at tackling what authorities call ‘hidden debt’ accumulated by local governments. Finance Minister Lan Fo’an told reporters that authorities planned to “actively use” available deficit space that can be expanded next year, signaling even more economic support to come.
The announcement comes as China faces multiple economic challenges, including a persistent real estate slump that has drastically limited local government revenues. Nomura estimates China has between 50-60 trillion yuan in hidden debt, and the new package could save local governments 300 billion yuan in interest payments annually.
However, the debt swap program fell short of many investors’ expectations for more direct fiscal stimulus, reflecting Beijing’s cautious approach amid uncertainty about future US trade policies under Trump’s incoming administration.
Source: CNBC