Lan Fo’an, China’s finance minister, center, speaks as Zheng Shanjie, chairman of the National Development and Reform Commission (NDRC), left, and Pan Gongsheng, governor of the People’s Bank of China (PBOC), listen during a news conference on the sidelines of the National People’s Congress in Beijing, China, on Wednesday, March 6, 2024.
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BEIJING — China’s Minister of Finance Lan Fo’an told reporters Saturday during a press briefing that the central government has room to increase debt and the deficit.
He said such policies were still under discussion. Four policies that have reached a decision-making stage covered support for local governments to address debt risks and stabilize real estate, major state-owned banks and youth employment, Lan said.
Economists have said China needs additional fiscal support, but Beijing has yet to announce any, even in the latest flurry of high-level policy announcements.
Analyst projections for how much fiscal stimulus is needed range from around 2 trillion yuan ($283.1 billion) to more than 10 trillion yuan.
Ting Lu, chief China economist at Nomura, had cautioned in a note Thursday that any such stimulus that could come during the briefing on Saturday would typically need approval by China’s parliament, expected to hold a meeting later this month. He added that how any funds are used is just as important as the amount that’s delivered — whether they only go to shoring up struggling local government finances or focus on boosting consumption.
China’s retail sales grew only modestly over the last few months, and the country’s real estate slump has shown few signs of turning around.
GDP rose by 5% in the first half of the year, sparking concerns that China could miss its full-year target of around 5%. All eyes are now on Oct. 18, when the National Bureau of Statistics is scheduled to release third-quarter GDP.
After markets reopened Tuesday following a weeklong holiday, mainland Chinese stocks became volatile throughout the week, as a stimulus-fueled rally lost stream. The declines took major indexes back to levels seen in late September.
Stocks had climbed then — the CSI 300 saw its best week since 2008 — as major policy announcements signaled that the Chinese government was finally stepping in to stimulate slowing growth.
Just days after the Federal Reserve began its easing cycle, the People’s Bank of China cut a few of its interest rates and extended existing real estate support measures by two years. The PBOC also launched a roughly $71 billion program allowing institutional investors to borrow funds for stock investing.
The National Development and Reform Commission, the top economic planning agency, pledged in a rare press conference Tuesday to speed up use of 200 billion yuan originally allocated for next year, mostly for investment projects. The NDRC did not announce additional stimulus.
Saturday is a working day in China, but markets are closed.
This is a breaking news story. Please check back for updates.
Check out the companies making headlines in midday trading: American Airlines — Shares slipped less than 1%, recovering from earlier losses, after the airline temporarily grounded all of its flights due to a technical issue. Broadcom — The semi stock added 2%, extending its December rally. Shares have surged more than 46% this month, propelling its 2024 gain above 112%. Big banks — Shares of some big bank stocks rose more than 1% amid news that a group of banks and business groups are suing the Federal Reserve over the annual stress tests, saying it “produces vacillating and unexplained requirements and restrictions on bank capital.” Citigroup , JPMorgan and Goldman Sachs shares gained more than 1% each. Arcadium Lithium — Shares rose more than 4% after the company announced its shareholders have approved the $6.7 billion sale to Rio Tinto . The deal is expected to close in mid-2025. International Seaways — The energy transportation provider surged 8% after an announcement that the company would be added to the S & P SmallCap 600 index, effective Dec. 30. The company will replace Consolidated Communications , which is soon to be acquired. Crypto stocks — Shares of stocks tied to the price of bitcoin rose as the cryptocurrency gave back recent losses amid a climb in tech names broadly. Crypto services provider Coinbase gained almost 3% and bitcoin proxy MicroStrategy gained more than 5%. Miners Riot Platforms and IREN gained 6% and 4%, respectively. U.S. Steel — The steel producer’s stock hovered near the flatline amid news that President Joe Biden will decide on the fate of its proposed acquisition by Japan’s Nippon Steel after a government panel failed to reach a decision . Apple — Apple shares gained 0.9% to notch a new all-time high. The stock has rallied nearly 34% year to date. — CNBC’s Sean Conlon, Lisa Han, Tanaya Macheel and Alex Harring contributed reporting.
A general view of the Federal Reserve Building in Washington, United States.
Samuel Corum | Anadolu Agency | Getty Images
The biggest banks are planning to sue the Federal Reserve over the annual bank stress tests, according to a person familiar with the matter. A lawsuit is expected this week and could come as soon as Tuesday morning, the person said.
The Fed’s stress test is an annual ritual that forces banks to maintain adequate cushions for bad loans and dictates the size of share repurchases and dividends.
After the market close on Monday, the Federal Reserve announced in a statement that it is looking to make changes to the bank stress tests and will be seeking public comment on what it calls “significant changes to improve the transparency of its bank stress tests and to reduce the volatility of resulting capital buffer requirements.”
The Fed said it made the determination to change the tests because of “the evolving legal landscape,” pointing to changes in administrative laws in recent years. It didn’t outline any specific changes to the framework of the annual stress tests.
While the big banks will likely view the changes as a win, it may be too little too late.
Also, the changes may not go far enough to satisfy the banks’ concerns about onerous capital requirements. “These proposed changes are not designed to materially affect overall capital requirements, according to the Fed.
The CEO of BPI (Bank Policy Institute), Greg Baer, which represents big banks like JPMorgan, Citigroup and Goldman Sachs, welcomed the Fed announcement, saying in a statement “The Board’s announcement today is a first step towards transparency and accountability.”
However, Baer also hinted at further action: “We are reviewing it closely and considering additional options to ensure timely reforms that are both good law and good policy.”
Groups like the BPI and the American Bankers Association have raised concerns about the stress test process in the past, claiming that it is opaque, and has resulted in higher capital rules that hurt bank lending and economic growth.
In July, the groups accused the Fed of being in violation of the Administrative Procedure Act, because it didn’t seek public comment on its stress scenarios and kept supervisory models secret.