China Confident in Achieving Economic Goals... Early Injection of 19 Trillion Budget Next Year

Announcement of a 200 Billion Yuan Stimulus Package

Following China's announcement of a 1 trillion yuan stimulus package on the 24th, an economic policy-related press conference was held immediately after the National Day holiday. Although a large-scale stimulus package was expected, no specific support measures were announced. However, it was revealed that 100 billion yuan (approximately 19.88 trillion won) would be injected early from next year's central budget, and there would be no problem achieving the initially concerning economic growth target of around 5%.

On the 8th, the National Development and Reform Commission of China held a press conference attended by Director-General Zheng Shanjie (ministerial level) and Deputy Directors Liu Suxu, Zhao Chenxin, Li Chunlin, and Zheng Bei to introduce the situation of "systematic implementation of the package stimulus policy, improvement of the economic growth structure, and continued improvement of the development trend."

[Image source=Reuters Yonhap News]

The stimulus policy refers to expansionary fiscal and monetary policies, including increased government investment and the operation of state-owned enterprise funds.

Initially, the market expected a "bazooka-level" policy support, but no specific support measures were announced.

Director-General Zheng evaluated that the Chinese economy is developing steadily despite increasing internal and external complexities. Although downward economic pressure is rising, the effects of various existing stimulus measures are emerging, making it possible to achieve the annual economic and social development goals (around 5% economic growth).

As specific measures to implement the stimulus policy, Director-General Zheng proposed ▲ improving efficiency and strengthening macro-policy implementation ▲ expanding domestic demand ▲ enhancing corporate support ▲ promoting stability in the real estate market ▲ revitalizing the capital market.

Director-General Zheng stated, "We have already allocated 1 trillion yuan (approximately 191 trillion won) of ultra-long-term special bonds to projects and local governments," adding, "We will accelerate the issuance and use of special bonds by local governments."

He also said, "Next year's list of some 'Liangzhong' (兩重; major national strategies and key areas such as safety and security capabilities) construction projects and central budget investment plans will be pre-established and allocated," adding, "Ultra-long-term special bonds will continue to be issued next year, and the direction of fund allocation will be optimized to further support Liangzhong construction." Within this year, 100 billion yuan will be preferentially allocated from next year's central budget, and 100 billion yuan will be pre-allocated for Liangzhong construction projects to enable local governments to speed up early preparation and proactively commence construction.

On the same day, the CSI 300 Index, composed of the top 300 stocks by market capitalization on the Shanghai and Shenzhen stock exchanges, initially rose about 11% but gave up gains to close with a 3% increase compared to the previous trading day due to the stimulus announcement falling short of market expectations. The Hong Kong Hang Seng Index started with a 1% decline and at one point in the morning plunged more than 6%.

Gary Ng, Chief Economist at Natixis, said, "Compared to previous announcements, there is little new, and the recent stimulus pledges seem weaker than market expectations."

Ding Shuang, Chief Economist for Greater China and North Asia at Standard Chartered Bank in Hong Kong, said the decline in the Hong Kong stock market and the National Development and Reform Commission press conference are "very related," adding, "The stock market had high expectations. But this is the National Development and Reform Commission, not the Ministry of Finance." He further predicted that the stimulus package would be announced by the end of this month, saying, "Not announcing the stimulus package today does not mean there will be no support measures."