China’s Finance Minister to hold briefing on Oct 12, firing up hopes for big stimulus

BEIJING – China will hold a briefing on fiscal policy on Oct 12 as investors look for additional measures to stimulate the world’s No. 2 economy.

The State Council Information Office announced the event on Oct 9. Finance Minister Lan Fo’an will introduce moves to strengthen fiscal policy to shore up growth and answer questions from reporters, according to the notice.

“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 senior currency strategist Fiona Lim at Malayan Banking.

“That said, the sense of urgency at the top is clear and recent monetary easing and housing measures were also sizeable. 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 per cent on speculation the nation may announce fiscal stimulus at the briefing. The offshore yuan extended a gain to trade 0.2 per cent 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 per cent 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 (NDRC)

disappointed on Oct 8 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 Mr Bruce Pang, chief economist for Greater China at Jones Lang LaSalle. “Only with the spending by the Ministry Of Finance can projects announced by the NDRC be rolled out and monetary easing have an impact on the real economy.”

Banks including Morgan Stanley and HSBC Holdings expect two trillion yuan (S$369 billion) in stimulus, while Citigroup puts the amount at three trillion yuan.

Economists have speculated on measures such as support for local government financing, infrastructure investment, a consumption boost and bank recapitalisation.

In a nod to the concerns of the private sector and investors, Chinese Premier Li Qiang on Oct 8 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 US$340 billion (S$443 billion) to support the stock market. The efforts prompted Chinese stocks to surge some 30 per cent.

Adding to the frenzy of action aimed at stabilising growth, the Chinese central bank on Oct 9 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 (PBOC) is overhauling its policy framework, including a 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. BLOOMBERG