Tianchen Xu on expected fiscal stimulus measures in China

Our overall take is quite positive in that MoF is willing to tackle China’s many economic challenges by leveraging its borrowing room.  The immediate benefits to the economy will be limited, as the MoF avoided large-scale direct cash handouts to households.  However, its commitment to restoring local public finances through fiscal transfer and debt replacement is highly commendable. 

In the medium term, it will put an end to the aggressive deleveraging by local governments and ease the resulting deflationary pressure.  And as their financial position stabilises, local governments will be better positioned to support the economy by providing public services and embark on public investments.

~ Tianchen Xu, Senior Economist, Economist Intelligence Unit, "China's briefing on stimulus gets lukewarm investor reception," Reuters, October 12, 2024

(Xu reacted to news conference with Finance Minister Lan Foan announcing more "counter-cyclical measures" this year without providing details on size of fiscal stimulus.)