(Bloomberg) -- China’s top legislative body will hold a highly anticipated session in Beijing on Nov. 4-8, the week of the US presidential election, as investors watch for any approval of fiscal stimulus to revive the slowing economy.
The once-every-two-month gathering of the Standing Committee of National People’s Congress will review a State Council report on financial work, along with a slew of draft laws on mineral resources, energy and anti-money laundering, the official Xinhua News Agency reported Friday.
The published agenda doesn’t specifically mention any plans for fiscal stimulus, although a previous decision to raise budget deficit mid-year in 2023 was disclosed only after lawmakers approved it.
“Markets are all watching this closely because everyone hopes the supportive stance indicated by various ministries could materialize into real actions,” said Bruce Pang, chief economist for Greater China at Jones Lang LaSalle Inc, noting that fiscal support requires the legislature’s approval.
Voting will come on the last day of the meeting, Nov. 8, three days after a US election that could have far-reaching consequences on global trade and China’s exports, a rare bright spot of the economy. Details of the adopted laws and reports will be released by state media afterward.
The legislators will also review appointment and removal of officials, Xinhua said without elaborating. The agenda was adopted at a meeting chaired by top legislator Zhao Leji on Friday.
The meeting will likely confirm a plan to refinance local governments’ debt and potentially provide details on the sales of government bonds to inject capital into banks as well as to support growth, said Michelle Lam, Greater China economist at Societe Generale SA.
Those measures were announced earlier this month by Finance Minister Lan Fo’an. The plans to resolve local government’s off-balance-sheet borrowing will be the largest effort to address the so-called hidden debt in recent years and was pending legal approval, he said then.
Bloomberg News earlier reported that China is considering allowing local authorities to issue as much as 6 trillion yuan ($853 billion) in bonds through 2027 mainly to refinance their off-balance-sheet debt, as part of a multi-pronged plan to boost the economy and help the country defuse financial risks.
Markets have hoped for fresh fiscal stimulus in the form of greater public borrowing and spending for weeks, but opinions differ over whether it’ll come this year.
What Bloomberg Economics Says...
We continue to rule out additional stimulus for the rest of the year, including at this meeting ... Fiscal spending has been behind schedule, and the key priority for the rest of the year should be on delivering planned spending, rather than boosting the budget.
— Chang Shu and David Qu
Read the full note here.
Several investment banks including Citigroup Inc. projected as much as 2 trillion yuan in additional stimulus on top of the planned debt swap, while Bloomberg Economics and BNP Paribas SA see no additional fiscal spending for this year as their base case scenario.
Pang, of Jones Lang LaSalle, said the key things to watch are whether China will issue special treasury bonds this year, as well as any additional flexibility for Finance Ministry to set the budget.
China’s economic expansion slowed in the third quarter despite tentative signs of improvement in September. Economy grew by 4.6% in the July-to-September period from a year prior, the slowest pace since March 2023. Chinese President Xi Jinping has called on officials to “make every effort” in the rest of the year to help the economy meet its annual growth target of around 5%.
Policymakers have unveiled measures including interest rate cuts and ramped up support for property and stock markets since late September, prompting a historic stock rally. But euphoria has faded as investors assess the strength of any fiscal package.
The stimulus efforts so far have also failed to impress global financial and monetary officials gathered in Washington this week. Speaking on the sidelines of an annual meeting of the International Monetary Fund and World Bank, they said China should do more to rebalance the economy as well as to tackle weak domestic demand and overcapacity.
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