Beijing is looking to increase the amount local governments can borrow, state media reported, as the government seeks to boost an economic recovery that remains fragile amid weak demand.
(Bloomberg) — Beijing is looking to increase the amount local governments can borrow, state media reported, as the government seeks to boost an economic recovery that remains fragile amid weak demand.
The Standing Committee of the National People’s Congress — the Communist Party-controlled parliament that oversees government borrowing — will meet later this month to review a bill assigning additional local government debt quotas in advance, the state-run Xinhua News Agency reported Friday.
Such a move would allow local governments to increase their borrowing this year beyond quotas set by the NPC in a government budget in March. Local governments were told to issue their entire quota of “special purpose” bonds mainly used for infrastructure investment by the end of September, leaving doubts about how fiscal stimulus would be funded toward the end of this year.
The report came after official data showed China’s consumer inflation slowed to zero in September, suggesting weak overall demand in the economy. Loan expansion by Chinese banks also fell year-on-year in September, data from the People’s Bank of China showed. Government bond issuance has been a key driver of credit growth in recent months.
Although economists generally believe China will meet its gross domestic product growth target of about 5% for this year, Beijing has been widely expected to increase fiscal stimulus. The property market slump and weak consumer confidence continue to drag on growth.
Bloomberg News reported earlier this week that Beijing was considering revising its budget to allow the issuance of more sovereign bonds, which would be an unusual move. Allowing local governments to use some of 2024’s debt quota in advance could allow for more bond issuance this year, without revising this year’s budget.
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