(Bloomberg) — China will allow local governments to issue bonds to buy unsold homes to prop up the ailing real estate sector as the country tries to put a floor under an economic slowdown.
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Authorities plan to use special local government bonds and instruments to help the real estate sector, Finance Minister Lan Fo’an announced at a briefing on Saturday. He indicated that the central government has room to expand spending and pledged more efforts to ease local governments’ debt burden, including by giving a “large” one-time quota to swap their debt for lower-interest bonds .
“The central government still has quite a large room to borrow and widen the deficit,” Lan said, adding that the government is “considering other instruments” than those announced at the briefing. He did not specify how much money was available for the home purchases using the special bonds.
Budget support is the biggest missing piece in a stimulus package that Beijing began deploying in late September in an unprecedented push led by the central bank that ranged from interest rate cuts to aid to real estate and stock markets.
Ahead of the event, investors and economists polled by Bloomberg expected the government to invest as much as 2 trillion yuan in new fiscal stimulus.
More expansionary government spending is considered crucial to revive the world’s second-largest economy, which is under deflationary pressure and at risk of missing the government’s 2024 growth target of around 5%.
Investors are also closely watching Lan’s briefing for clues about how far Beijing is willing to go on pro-growth efforts that have fueled a global stock rally.
(Updates with more details)
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