China Prepares $1.4 Trillion Stimulus Package to Revitalize Struggling Economy

China is reportedly exploring a significant economic stimulus initiative aimed at rejuvenating its struggling economy.

The nation, recognized as the world’s second-largest economy, may soon approve a fiscal boost worth 10 trillion yuan, equivalent to about $1.4 trillion, with announcements potentially coming next week, as per reports from Reuters.

This initiative is set to involve raising new debt through the issuance of special sovereign bonds and local government securities in the upcoming years. Insiders suggest that the plan includes raising around 6 trillion yuan (approximately $840 billion) over the next three years to assist local governments in addressing hidden debts on their balance sheets. Furthermore, an additional 4 trillion yuan ($560 billion) is earmarked to revitalize the struggling property sector.

The urgency for such a stimulus arises following a wave of bank closures in June, where several financial institutions in China were acquired by larger counterparts amid a significant decline in the real estate market. This downturn has been fueled by inadequate risk management and escalating local government debts.

Next week, the Standing Committee of the National People’s Congress, which serves as China’s national legislature, is scheduled to meet to deliberate on the proposed stimulus measures. This timing coincides with the U.S. presidential election, adding an interesting dynamic to the situation.