(Bloomberg) -- China moved to further ramp up support for the economy, promising more aid for the slumping property sector and indebted local governments...
-- China moved to further ramp up support for the economy, promising more aid for the slumping property sector and indebted local governments . But officials still haven’t convinced economists that they’re doing enough to defeat deflation.At a highly anticipated briefing on Saturday, Finance Minister Lan Fo’an refrained from putting a price tag on China ’s fiscal stimulus as investors expected, signaling that details would come when China ’s legislature meets in the coming weeks.
“My sense is that the fiscal policy moves will take a little too long to roll out for us to hit 5% this year, unless the ultimate scale of fiscal stimulus ends up being much larger than forecast,” said Lynn Song, chief economist for Greater China at ING Bank N.V., referring to China’s economic growth target for 2024.
As far as direct subsides are concerned, Lan said Saturday that China would hand out twice the number of scholarships and step up financial aid to students, a move that comes after youth unemployment rose in August to the highest level this year. He also vowed to continue to provide support to groups in need, citing a one-off handout to the poor last month as an example.
The old playbook of using debt-fueled investment into public projects — from roads to bridges — has become less effective after decades of urbanization left the country saturated with infrastructure. Because of a lack of high-quality projects, authorities have more money at their disposal than projects to spend it on.
By allowing local governments to swap more “hidden debt,” Beijing is also trying to rein in credit risks at companies that borrowed aggressively on behalf of local governments in past years to help fund infrastructure. However, bonds spent for debt swaps generate no new growth in the economy even though they help maintain financial and social stability.
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