(Bloomberg) — China’s recent rollout of stimulus is centered around lifting domestic demand and hitting the nation’s annual growth goal, said Vice Finance Minister Liao Min, as investors await a meeting of lawmakers expected to unveil details of Beijing’s crucial fiscal package.
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“The goals are to enhance the strength of macro policies to expand domestic demand and reach this year’s GDP growth target,” Liao told Bloomberg News on Friday in Washington, on the sidelines of the International Monetary Fund and World Bank’s annual meetings. “And in the meantime to coordinate with monetary policy to push for the restructuring of the economy, particularly to boost domestic demand including consumption.”
“The size of this round of policies will be of quite large scale,” he said, reiterating a sentiment previously expressed by Finance Minister Lan Fo’an.
Liao said he made clear to delegates from other nations that any details of China’s fiscal policy will only come after the conclusion of the National People’s Congress Standing Committee meeting, which is scheduled to take place Nov. 4 to Nov. 8. “There’s a legal process to go through for China’s fiscal policy,” he added.
Chinese officials have unleashed their boldest economic stimulus since the pandemic in recent weeks, after a slew of weak economic data put Beijing in danger of missing its about 5% annual expansion target. While that package has included rate cuts, more cash for banks and housing sector support, measures including a push to steady local government debt have been seen as more focused on mitigating risks than stimulating growth.
China’s yearslong property crash has wiped out billions of dollars in household wealth, piling deflationary pressures onto the economy as consumers turn cautious. Liao called the use of ultra-long special sovereign bonds to fund a consumer goods trade-in program this year “unprecedented.”
“To certain degree, it demonstrates that consumption has become an important consideration in China’s fiscal policymaking,” he said.
US Treasury Secretary Janet Yellen this week in Washington criticized the stimulus blitz so far for failing to address the sensitive issue of overcapacity, as weak domestic demand sends a flood of cheap exports abroad. IMF director Kristalina Georgieva also warned China’s annual growth could drop to “way below” 4% in the future without reforms to lift domestic consumption.