BEIJING (Reuters) – Chinese lawmakers reviewed a cabinet bill that would raise ceilings on local government debt to replace existing hidden debt as the standing committee of China’s top legislature started their meeting on Monday, state media Xinhua reported.
The bill is a closely-watched topic on the agenda of the Monday to Friday meeting of the Standing Committee of the National People’s Congress (NPC), as the heavy burden of local government debt has weighed on investment and economic growth.
Lawmakers reviewed the proposal by the State Council, or the cabinet, on raising local government debt limits to replace their existing hidden debt, Xinhua said.
On behalf of the State Council, Minister of Finance Lan Foan explained the bill and Xu Hongcai, Vice Chairman of the NPC Financial and Economic Affairs Committee, made a report on the committee’s review result of the proposal.
The Chinese economy has lost steam since the second quarter as a prolonged property market downturn and ballooning local government debt dented growth momentum.
Last month, Lan said China would “significantly increase” government debt and support consumers and the property sector, but gave no details of the scale or timing of the fiscal measures.
Lan said China plans a large-scale debt swap program, alongside continued use of bond quotas for debt resolution, describing the measures as the “strongest” debt reduction measures in recent years. Detailed policies will be announced after legal procedures are completed, he said.
Reuters reported last week that China is considering approving new debt issuance of more than 10 trillion yuan ($1.4 trillion) to tackle hidden local government debt and fund buybacks of idle land and reduce a giant inventory of unsold flats, citing sources with knowledge of the matter. The approval is expected to be announced on Friday, according to the report.
Beijing may announce a stronger fiscal package if U.S. Republican candidate Donald Trump wins a second presidency as his return to the White House is expected to intensify the economic headwinds for China, the sources said.
($1 = 7.0955 Chinese yuan renminbi)