China’s fiscal package needs to be sizeable to maintain momentum: economist

Name: Boom or bust: how sustainable is China’s stock frenzy?
Uploaded: 2024-10-04T00:30:09.000Z
Duration: 6 min 57 s
Description: Boom or bust: how sustainable is China’s stock frenzy?

Leading Chinese economist Mao Zhenhua says China should consider issuing additional long-term treasury bonds following last week’s raft of measures

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Mao Zhenhua, co-director of Renmin University’s Institute of Economic Research. Photo: Weibo

Amanda Lee

Published: 8:30am, 4 Oct 2024Updated: 5:22pm, 4 Oct 2024

China should issue at least 10 trillion yuan (US$1.4 trillion) worth of long-term special treasury bonds to boost consumption and help local governments to pay off debt owed to the private sector, a leading Chinese economist said.

The suggestion from Mao Zhenhua, co-director of Renmin University’s Institute of Economic Research, came as analysts widely expect Beijing to come up with a fiscal stimulus package following a raft of interest rate cuts and monetary policy easing last week, which had sparked a rally in the Chinese stock market.

Mao said China should consider issuing additional long-term treasury bonds of a significant size – a move that would lift its official fiscal deficit ratio of 3 per cent of its gross domestic product this year.

“For example, we should be considering at least 10 trillion yuan,” said Mao, who is also the founder of the China Chengxin Credit Rating Group.

“I think it needs to be sizeable for it to be effective to lift the economy and maintain the positive environment following the monetary policy easing [by the central bank].”

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Boom or bust: how sustainable is China’s stock frenzy?

Mao suggested that the proceeds from the long-term treasury bonds could be channelled to subsidising household spending in the form of consumption vouchers and to repay some of the money owed to the private sector to improve local governments’ credit records.

Tax reductions for businesses should also be considered, Mao added, while some of the proceeds from the long-term treasury bonds could be allocated to local governments to cover revenue lost due to tax cuts.

China’s fiscal package needs to be sizeable to maintain momentum: economist

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Leading Chinese economist Mao Zhenhua says China should consider issuing additional long-term treasury bonds following last week’s raft of measures

Leading Chinese economist Mao Zhenhua says China should consider issuing additional long-term treasury bonds following last week’s raft of measures