China gives $28 billion to local governments as it vows to meet economic targets
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China has set aside 200 billion yuan ($28 billion) for investment projects by local governments this year, as it promised to meet its own ambitious economic growth targets.
The news was announced by the country’s top planning agency, the National Development and Reform Commission (NDRC), at a Tuesday press conference, which disappointed investors who were expecting a much larger package of stimulus measures.
“We are confident in achieving the annual economic and social development goals and tasks, and in maintaining sustained, stable and healthy economic and social development,” Zheng Shanjie, the commission’s chairman, told reporters in Beijing.
China announced a 5% target growth rate in March, but a series of economic data over the summer has been so weak that economists were worried the goal might be missed. The world’s second-largest economy is in poor shape and suffers from a property crisis, weak spending and high youth unemployment, among other woes.
To help local governments struggling with mountains of debt, Beijing will provide 100 billion yuan ($14 billion) from the central government’s budget and an extra 100 billion yuan for investment projects, Zheng said.
Economists have been expecting additional fiscal measures totaling about 2 trillion yuan ($285 billion) to be announced this month, after Chinese leader Xi Jinping finally gave the nod in late September to a much-needed growth plan following months of dismal economic data.
“The NDRC provided a clear message today that policymakers will continue with a pro-growth stance. Nevertheless, investors were disappointed at the lack of details on new fiscal measures,” Fred Neumann, chief Asia economist for HSBC, told CNN. “Fiscal easing is urgently needed to accelerate growth on a sustainable basis. This is likely to come later this month.”
The measures announced last month have focused largely on monetary policy, which typically refers to decisions made by central banks to influence the cost of borrowing and control inflation. Fiscal measures, on the other hand, can include the use of taxation or other measures to impact public spending more directly.
The lack of a “bazooka” announcement on Tuesday poured cold water on the stock mania in Hong Kong and mainland China. Blue-chip stocks listed in Shanghai and Shenzhen last traded 6% higher, after soaring more than 9% at the market open. Hong Kong’s benchmark Hang Seng Index, which has just had its best two-week period since at least 2005, lost more than 5%.