China unveils £1.1bn stimulus package

8th Nov 2024 09:13

(Sharecast News) - China unveiled its latest stimulus package on Friday, as it looked to tackle surging levels of local government debt and revive the country's flagging economy.

Following a week-long meeting, Beijing approved a Rm10trn (£1.1bn) plan to help heavily-indebted local governments refinance. The funds will go towards reducing off-balance, or hidden, debts.

Debt quotas will be raised by Rm6trn, Reuters reported, with local governments also able to use another Rm4trn in issuance that has already been approved to finance the debt swaps.

Local government revenues have been hit hard in recent years, after tax revenues fell but spending spiked during the pandemic. The subsequent crisis in the country's once red-hot property sector has also weighed heavily.

The package is the latest in a series of measures announced by Beijing in recent months, as it looks to bolster the economy.

However, officials did not announce any measures to help sluggish domestic demand, disappointing some and weighing on Asian stocks. In Europe, car makers and luxury goods companies - which rely heavily on the Chinese market - fell sharply. The renminbi also softened against the dollar.

The package comes just 48 hours after Donald Trump was re-elected US president. The election of Trump - who campaigned on higher tariffs - has heighted concerns of renewed trade tensions between China and the US.

Russ Mould, investment direct at AJ Bell, said: "What has been announced so far doesn't seem to be moving the needle, and the risks to China from a second Trump presidency are now overshadowing efforts to get the economy moving.

"The question on investors' lips will be whether this encourages Beijing to unveil a bolder package of measures."

Finalto's chief market analyst, Neil Wilson, said: "Until there is a full, quantitative-easing bazooka, China is not turning itself around. It has to up domestic demand."