“Construction continues at Hongkong Land’s site in Shanghai, as of November 4, 2024.

In Beijing, it is widely anticipated that further fiscal support will be announced this Friday, following the conclusion of a five-day parliamentary session. Government officials have consistently been increasing stimulus measures since late September, resulting in a notable boost in the stock market. A meeting led by President Xi Jinping on September 26, called for enhanced fiscal and monetary support, with a focus on halting the downturn in the real estate market.

The People’s Bank of China has already decreased several interest rates. However, any significant surge in government debt or spending needs the green light from the National People’s Congress, China’s parliament. This approval might be given at the weeklong meeting of the legislature’s standing committee. During a similar meeting in October of the previous year, a unique increase in China’s deficit from 3% to 3.8% was approved, as reported by state media.

With Donald Trump’s victory in the U.S. presidential election, who has previously threatened to impose severe tariffs on Chinese goods, analysts are predicting an increase in fiscal support. However, some experts are urging caution, suggesting that Beijing might maintain a conservative approach and not offer direct support to consumers.

When discussing potential fiscal support at a press conference last month, Finance Minister Lan Fo’an highlighted the importance of addressing the issue of local government debt.

So far, during the parliamentary meeting, officials have been considering a plan to increase the cap on the amount of debt local governments can issue, according to state media. This additional quota would be allocated towards replacing local governments’ concealed debt.

Nomura, a financial services group, estimates that China has hidden debt amounting to 50 trillion yuan to 60 trillion yuan ($7 trillion to $8.4 trillion). It is expected that Beijing could permit local authorities to increase debt issuance by 10 trillion yuan over the coming few years.

This could result in local governments saving 300 billion yuan in annual interest payments, according to Nomura.

In recent years, the slump in the country’s real estate market has significantly reduced a vital source of local government income. Regional authorities have also had to spend on Covid-19 control measures during the pandemic.

Even before the pandemic, local Chinese government debt had risen to 22% of GDP by the end of 2019. This was a much higher increase than the growth in revenue available to service that debt, as stated in a report by the International Monetary Fund.”