China unveils $1.4tn debt swaps, relief to local governments

China gave indebted local governments a 10-trillion-yuan ($1.4-trillion) lifeline but stopped short of unleashing new stimulus, preserving room to respond to a potential trade war when Donald Trump takes office next year.
Officials unveiled details of a program to refinance “hidden” local debt onto public balance sheets at a press briefing in Beijing on Friday. Funds for that programme – telegraphed last month but without a price tag or timeframe – will be provided through 2028, they said, after the move was authorised by the nation’s top lawmaking body.
While policymakers didn’t announce measures to directly stimulate domestic demand, FM Lan Fo’an promised “more forceful” fiscal policy next year, signalling bolder steps could come after Trump’s inauguration in Jan. Trump has threatened 60% tariffs on Chinese goods that could decimate trade between the world’s largest economies.
China’s boldest stimulus blitz since the pandemic has sent onshore shares soaring by about 30% since Sept, taking the pressure off officials to act immediately. Those rate cuts, along with stock and housing market support pledges, have put President Xi Jinping back on track to hit this year’s growth goal of around 5%, without taking on piles of extra debt to reflate the economy.
Investors had waited for weeks for the fiscal side of that campaign, with media reports stoking expectations for more spending to stabilise the property market and boost consumption. Disappointment was palpable at the start of the presser, with the offshore yuan weakening as much as 0.6% before paring the decline to 0.3%.