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CHINA: Debt Swap Package Meets CNY10tln Expectations, More To Come In '25

CHINA
EM BulletAPACChinaEmerging Market NewsBulletGlobalFixed Income BulletsForeign Exchange BulletsRegionMarkets

The policymaker press conference confirmed that the Chinese debt swap package for local governments will total CNY10tln, with the aim of cutting hidden local government debt by CNY12tln come ’28 (from CNY14.3tln to CNY2.3tln).

  • A reminder that a debt package of ~CNY10ln was previously outlined by RTRS. This package seems broadly in line with that, at least at first glance.
  • The policymakers also noted that bank recapitalisation work will be accelerated, while tax measures to support the property sector will be rolled out soon.
  • We suggested that more meaningful consumer support may not be forthcoming at this juncture ahead of the press conference and that has held true (at least as of typing).
  • Looking forwards, policymakers pointed to the rollout of further fiscal support during ’25, with active planning already under way and “large” fiscal space flagged.
  • This will give them time to assess initial U.S. policy preferences during the early stages of President Trump’s second term.
  • The fact that debt swap size seemed to meet wider expectations allowed some of the knee-jerk risk-off move to fade.
  • Markets still more risk-off than they were pre-press conference given the lack of upside surprise in the package.
  • USD/CNH 7.1770 vs. highs of 7.1908 and pre-press conference levels just below 7.1800.
  • Euro Stoxx 50 futures hold near lows, last 4,852.00.
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The policymaker press conference confirmed that the Chinese debt swap package for local governments will total CNY10tln, with the aim of cutting hidden local government debt by CNY12tln come ’28 (from CNY14.3tln to CNY2.3tln).

  • A reminder that a debt package of ~CNY10ln was previously outlined by RTRS. This package seems broadly in line with that, at least at first glance.
  • The policymakers also noted that bank recapitalisation work will be accelerated, while tax measures to support the property sector will be rolled out soon.
  • We suggested that more meaningful consumer support may not be forthcoming at this juncture ahead of the press conference and that has held true (at least as of typing).
  • Looking forwards, policymakers pointed to the rollout of further fiscal support during ’25, with active planning already under way and “large” fiscal space flagged.
  • This will give them time to assess initial U.S. policy preferences during the early stages of President Trump’s second term.
  • The fact that debt swap size seemed to meet wider expectations allowed some of the knee-jerk risk-off move to fade.
  • Markets still more risk-off than they were pre-press conference given the lack of upside surprise in the package.
  • USD/CNH 7.1770 vs. highs of 7.1908 and pre-press conference levels just below 7.1800.
  • Euro Stoxx 50 futures hold near lows, last 4,852.00.