China weighs major fiscal stimulus tied to US Election outcome

China is gearing up to inject significant fiscal stimulus into its economy, with plans to issue over 10 trillion yuan ($1.4 trillion) in additional debt over the next few years, a fiscal package which is expected to be bolstered if Donald Trump wins the election.

The Standing Committee of the National People’s Congress (NPC) is set to approve this package, which includes six trillion yuan to be raised through special sovereign bonds, during its meeting from November 4th to 8th.

The six trillion-yuan debt will be raised over three years, with the funds primarily allocated to addressing local government debt risks. This substantial injection of liquidity, equivalent to over eight per cent of China’s GDP, aims to counteract the impact of the prolonged property sector crisis and mounting local government debt.

The timing of the NPC Standing Committee’s meeting, coinciding with the US presidential election, provides Beijing with flexibility to adjust the stimulus package based on the outcome. A potential Trump victory, with its implications for heightened economic tensions, could lead to a more substantial stimulus package.

In addition to the six trillion-yuan debt, the NPC Standing Committee is also considering approving up to four trillion yuan in special-purpose bonds for land and property purchases over the next five years.

Attribution: Reuters

Subediting: M. S. Salama