While the Great Rise in Bitcoin Continues, 1.4 Trillion Dollar Earthquake News Came from China!

It has been reported that China is considering preparing a fiscal package that includes new borrowing exceeding 10 trillion yuan ($1.4 trillion) in the next few years to stabilize its fragile economy.

According to sources with knowledge of the matter, the plan, which is expected to be approved by the National People’s Congress Standing Committee (NPC) at a meeting to be held between November 4-8, aims to combat local government debt risks and stimulate growth.

The proposed package includes 6 trillion yuan of special government bonds to be issued over three years, starting from 2024. The funding will primarily address unregistered local government debt, which has ballooned amid the long-running property sector crisis. The fiscal plan will be financed entirely by special treasury and local government bonds, equivalent to more than 8% of China’s GDP, and signals Beijing is moving towards more aggressive economic support measures.

The timing of the NPC meeting coincides with the US presidential election on November 5, which could give Beijing flexibility in adjusting the fiscal package. Sources stated that China may prefer a stronger incentive if former President Donald Trump wins, as Trump’s return to office is expected to increase economic tensions between the two countries.

While this new information is far from the “2008-like boom” some investors were hoping for, it is in line with market speculation that China is preparing a significant stimulus. The financial discussions follow the aggressive monetary measures taken by the Central Bank at the end of September, the most significant support it has given since the COVID-19 outbreak.

In addition to addressing local government debt risks, the NPC Standing Committee will greenlight up to 4 trillion yuan in special purpose bonds for the acquisition of idle land and property over the next five years, sources said. Financial analysts interpreted these moves as an indication that Beijing’s current priorities are to stabilize the financial system and support domestic demand, with an emphasis on addressing hidden debt burdens first.

Tommy Xie, Head of Greater China Research at OCBC Bank, stated that Beijing’s policy approach prioritizes local government debt, financial stability and then stimulating domestic demand.

While sources state that financial plans are not finalized and are subject to changes, the timing of the upcoming NPC session and its coincidence with the US elections signal a strategic approach.

*This is not investment advice.