China apparently intends to incur an additional 774 billion euros in debt.
It's being suggested that China might launch special government bonds to finance economic stimulus initiatives. This could add up to six trillion yuan (approximately 774 billion euros) over a span of three years, based on reports from local media outlets.
This development comes after Finance Minister Lan Foan's revelation over the weekend, indicating Beijing's intention to substantially heighten its debt levels. The government intends to employ this fresh stimulus package to bolster the finances of low-income individuals, revive the sluggish real estate sector, and rejuvenate the capital reserves of state-owned banks. Additionally, it seeks to assist regional governments in managing their debt crises.
China's economy hasn't bounced back as anticipated post-COVID-19. To tackle this, Beijing unveiled its largest economic stimulus package since the outbreak in late September. However, the announced scale of debt issuance didn't impress market analysts, leading to a 0.3% decline in significant stock indices on Tuesday.
"These strategies fit our forecasts," commented ANZ analyst Xing Zhaopeng. He anticipates that the government will set a growth target of five percent for the forthcoming year, and the probability of attaining this rate in 2024 and 2025 will significantly enhance.
The International Monetary Fund (IMF) estimates China's central government debt at 24% of its GDP. However, according to IMF data, total public debt, including that of regional governments, amounts to around 16 trillion dollars or 116% of its GDP.
Amidst these stimulus measures, there's a growing discussion about China's potential exploration of an Economic and Monetary Union (EMU) with other Asian economies, akin to the EU in Europe. This could provide a collective response to economic challenges and promote financial stability.
Given China's increasing debt levels, the suggestion of an Economic and Monetary Union could be seen as a long-term strategy to manage its financial obligations more effectively, leveraging collective resources and decision-making for a more stable economic future.
