Getty Images
- China approved a plan to adjust its budget and issue more sovereign debt, Bloomberg reported.
- $137 billion in debt could be issued, while 2024's budget deficit could be increased, sources told Reuters.
- This may help take the debt burden off of local governments, and revive the economy next year.
Chinese authorities have approved additional sovereign debt and a change to the 2023's state budget, efforts meant to provide added stimulus for the country's strained economy, Bloomberg reported.
While the plan's details have not been made public, China is set to approve around $137 billion in sovereign debt issuance, insiders told Reuters. Government advisors are also pushing for China to increase its 2024 budget deficit beyond the usual 3% of its GDP; by doing so, more government debt could be issued, helping to revive the economy.
Beijing has rarely modified its budget mid-year. Previous instances have only occurred in periods of strain, such as the 2008 crash and the 1990s Asian financial crisis.
Though the country showed surprising strength in the third quarter, these moves are meant to help boost growth into the next year. Economists predict that growth will slow to 4.5% in 2024, and challenges will persist.
Already, China has been pummeled by a collapsing property market, while lackluster spending and productivity trends have dashed this year's economic hopes. Capital flight out of the nation's markets has been rampant.
The emphasis on sovereign bonds could underline a changing policy approach, placing debt burdens more on the national government, as opposed to local authorities. Debt levels among regional governments have been a rampant issue, especially as their finances largely rely on China's crumbling real-estate sector.
Where the central government's debt-to-GDP ratio is 21%, local government's hold a much higher ratio at 76%, Reuters reported.
But while Beijing's turn to stimulus is a shift away from the state's long-standing opposition to increased debt, it may not be a sufficient enough solution, sources told the outlet.
Instead, structural reforms should be implemented that encourage increased household spending, reduce investment reliance, and give private firms a helping hand.
"We need to make good preparations for next year and implement policies to stabilize growth. The foundation of economic recovery is not solid," an anonymous cabinet adviser told Reuters.