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CHINA: Weekend News Disappoints Global Investors.

CHINA
EM BulletAPACChinaEmerging Market NewsBulletGlobalFixed Income BulletsForeign Exchange BulletsRegionMarkets
  • Over the weekend, China’s Ministry of Finance provided guidance as to areas of its focus in the coming months.
  • The Finance Minister Lan Fo’An kept the government’s 5% growth target highlighting local government’s challenges in identifying, financing and executing on development projects that meeting specific criteria set by the Central Government.
  • Local governments had budgeted significant amounts for these projects and official estimates are that only 50% of the budgeted amount has been utilized.
  • Lan provided guidance on available budget headroom for further fiscal stimulus and that his ministry is considering new policies and new policy tools.
  • Additionally, Lan indicated that the Central Government would allow a one-off rise in regional government debt limits to allow local governments to refinance existing debt, similar to the policy implemented in 2015 aimed at bringing on balance sheet the hidden debts so endemic in the system then.
  • Although Lan did not announce new measures for the housing sector, he did reaffirm a desire and intention to continue to stabilize the sector.  He discussed the potential for reducing mortgage costs and a focus on developers delivering pre-sold homes to buyers.
  • Global markets have interpreted this as a disappointing ‘announcement’ from the MOF, with the Hang Seng down 1.5%, whilst onshore equities are modestly higher.
  • What it appears to be is simply a re-attestation of what has been announced thus far and likely points investors focus to the next party meeting. 
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  • Over the weekend, China’s Ministry of Finance provided guidance as to areas of its focus in the coming months.
  • The Finance Minister Lan Fo’An kept the government’s 5% growth target highlighting local government’s challenges in identifying, financing and executing on development projects that meeting specific criteria set by the Central Government.
  • Local governments had budgeted significant amounts for these projects and official estimates are that only 50% of the budgeted amount has been utilized.
  • Lan provided guidance on available budget headroom for further fiscal stimulus and that his ministry is considering new policies and new policy tools.
  • Additionally, Lan indicated that the Central Government would allow a one-off rise in regional government debt limits to allow local governments to refinance existing debt, similar to the policy implemented in 2015 aimed at bringing on balance sheet the hidden debts so endemic in the system then.
  • Although Lan did not announce new measures for the housing sector, he did reaffirm a desire and intention to continue to stabilize the sector.  He discussed the potential for reducing mortgage costs and a focus on developers delivering pre-sold homes to buyers.
  • Global markets have interpreted this as a disappointing ‘announcement’ from the MOF, with the Hang Seng down 1.5%, whilst onshore equities are modestly higher.
  • What it appears to be is simply a re-attestation of what has been announced thus far and likely points investors focus to the next party meeting.