MoF keeps some fiscal firepower in reserve
Finance Minister Lan Fo’an is looking to reassure markets that Beijing has plenty of fiscal firepower.
At his press conference on Saturday, where he outlined upcoming measures to ease local government debt pressures and support the property sector, Lan also emphasized that:
- “We also have other policy tools that are being studied."
- "The central government still has a lot of room for borrowing and increasing deficits.”
But Lan also indicated that there's currently no need for additional infrastructure funding as part of the upcoming support package.
- Specifically, he pointed out that RMB 2.3 trillion of funds already raised from central and local government bonds can be utilized before year-end to keep getting shovels in the ground.
Some context: Last week, the NDRC said local governments must issue their full-year SPB quotas by end-October.
- In previous years, similar moves have been followed by MoF approving additional local or central government debt issuance to fund infrastructure spending.
Get smart: This year, it looks like additional fiscal resources, which should be announced soon, will be aimed at alleviating local government debt pressures and potentially offering direct aid to some households.
- Meanwhile, officials feel that the infrastructure funding pipeline is adequately stocked.
Our take: The fact that officials are resisting the urge to resort to their typical infrastructure stimulus should be positive, in that it will keep the economy's supply-demand imbalance from worsening.
- That said, if Beijing doesn't announce its concrete plans for fiscal support soon, investors are going to have a fit.
What to watch: The legislative session at the end of October should finally be the venue for Beijing to lay out its near-term fiscal plans.