(Bloomberg) — China announced it would hold a briefing on fiscal policy on Saturday as investors look for additional measures to stimulate the world’s No. 2 economy.
Most Read from Bloomberg
Finance Minister Lan Fo’an will introduce moves to strengthen fiscal policy to shore up growth, and answer questions from reporters, the State Council Information Office said in a statement on Wednesday. The briefing will start at 10 a.m. local time on Saturday.
The announcement came as China’s world-beating stock rally lost steam after its economic planning agency announced weaker-than-expected stimulus measures in the government’s first briefing following a weeklong holiday.
“Markets continue to swing between disappointment and hope for fresh, meaningful fiscal stimulus that would have a greater impact on business sentiment and employment,” said Fiona Lim, senior currency strategist at Malayan Banking Bhd. “That said, the sense of urgency at the top is clear and recent monetary easing and housing measures were also sizable. As such, it is worthwhile to be cautiously optimistic at this stage.”
China’s CSI 300 Index pared losses on the news. The country’s 30-year government bond futures erased gains of as much as 0.8% on speculation the nation may announce fiscal stimulus at the briefing. The offshore yuan extended a gain to trade 0.2% stronger.
Stock investors have looked for greater fiscal spending to arrest a slowdown that threatens to put the country’s 2024 target of about 5% growth out of reach. Many expect an announcement by the Ministry of Finance, typically tasked with issuing bonds to support stimulus measures, after the National Development and Reform Commission disappointed on Tuesday by announcing no major pro-growth steps after the long national holiday.
“This is a high-profile briefing as fiscal policy has been a focus of the market,” said Bruce Pang, chief economist for Greater China at Jones Lang LaSalle Inc. “Only with the spending by the MOF can projects announced by the NDRC be rolled out and monetary easing have an impact on the real economy,” he said.
Banks including Morgan Stanley and HSBC Holdings Plc expect 2 trillion yuan ($283 billion) in stimulus, while Citigroup Inc. put the amount at 3 trillion yuan. Economists have speculated measures such as support for local government financing, infrastructure investment, a consumption boost and bank recapitalization.
In a nod to the concerns of the private sector and investors, Chinese Premier Li Qiang on Tuesday vowed to “listen to the voice of the market” when formulating economic policies. His remarks echoed recent calls by China’s top decision-making Politburo to “face the difficulties squarely,” underscoring Beijing’s renewed urgency to shore up confidence after the economy grew at its slowest pace in five quarters.
Just before the Golden Week holiday, the government unleashed a slew of stimulus measures including interest rate cuts, more liquidity to promote bank lending and a pledge of as much as $340 billion to support the stock market. The efforts prompted Chinese stocks to surge some 30%.
Adding to the frenzy of action aimed at stabilizing growth, the Chinese central bank on Wednesday said it held its first joint meeting recently with the Ministry of Finance about diversifying the monetary policy toolbox and “gradually” increasing the monetary authority’s sovereign bond trading in the open market.
The People’s Bank of China is overhauling its policy framework, including the move to manage interbank liquidity via bond trading, as it seeks to improve the effectiveness of monetary adjustments in aiding the economy and keep risks of speculation in the bond market in check.
The authorities will continue to strengthen policy coordination and create an “appropriate market environment” for bond trading by the PBOC, it said.
–With assistance from Yujing Liu, Matthew Burgess, April Ma, Tian Chen and Iris Ouyang.
(Updates with more details)
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.
