(Bloomberg) -- China is weighing approving over 10 trillion yuan ($1.4 trillion) in additional borrowing in the coming years to shore up the economy and address local governments’ debt risks, Reuters reported, citing unnamed sources.
The fiscal stimulus may be approved at a meeting by China’s top legislative body to be held Nov. 4-8, according to the Tuesday report. The package includes 6 trillion yuan in debt to be raised over three years including 2024 to help local authorities resolve off-balance-sheet debt, as well as 4 trillion yuan worth of bonds to fund regional governments’ purchases of idle land and properties over the next five years, it said.
The stimulus could be bigger if Donald Trump wins his reelection bid next week because the former US president is expected to increase economic challenges for China, according to the report.
The session by China’s top legislative body comes as markets anticipate details of fiscal support for the economy to bolster Chinese President Xi Jinping’s most forceful economic stimulus plan since the pandemic.
Economists expect the meeting to confirm a plan to refinance local governments’ debt and issuance of sovereign bonds to inject capital into banks. Investors have been on the lookout for fresh stimulus in the form of greater public borrowing and spending, but opinions differ over whether it’ll materialize this year.
The active FTSE China A50 Index Futures contract traded 1.3% higher in Singapore as of 5:40 p.m. local time following the report.
The 6 trillion yuan for local debt problems would partly be raised by selling special sovereign bonds, while the 4 trillion yuan for property will be funded by local government special bonds, according to the Reuters report. China is also considering other measures worth at least one trillion yuan, including efforts to boost consumption, it said.
Reuters also reported that another trillion yuan could be raised to inject capital into major banks. Bloomberg News last month reported that China was considering such an injection to increase lenders’ capacity to support the struggling economy.
Bloomberg News separately reported earlier this month that China is considering allowing local authorities to issue as much as 6 trillion yuan in bonds through 2027 mainly to refinance their off-balance-sheet debt. An earlier report by Caixin also cited a 6 trillion yuan figure but said the bonds would be issued by the central government rather than provinces.
--With assistance from April Ma.
(Updates with stock market move in sixth paragraph)
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