China unveils $1.8 trillion plan to tackle hidden local government debt

Aim is to defuse risks to financial system; bigger moves expected in case of trade war

- Joyce ZK Lim and Michelle Ng

SHENZHEN/BEIJING - Chinese officials on Nov 8 unveiled the country's largest effort in recent years to address hidden local government debt, a longstanding drag on economic growth, but disappointed investors looking for a big fiscal stimulus package to directly boost the tepid economy.

Beijing will roll out a 10 trillion yuan (S$1.8 trillion) package - of which 6 trillion is newly approved - for local governments to bring off-books arrears onto their balance sheets, senior officials including Finance Minister Lan Fo'an said at a press briefing, as top legislators wrapped up a closely watched five-day meeting.

This measure does not amount to direct fiscal stimulus - which Mr Lan signalled was in the works - but is instead aimed at defusing risks to the financial system, and giving cash-strapped local governments more breathing room.

Observers hoping to learn how much China would spend to reflate its economy were left none the wiser.

Analysts, however, noted that Chinese officials may not have seen an immediate need for more stimulus, and could be reserving policy flexibility for after US President-elect Donald Trump, who during his first term from 2017 to 2021 started a bruising trade war with China, returns to the White House in January 2025.

China's exports, a key driver of its economy, are in danger with Trump having pledged to impose tariffs of 60 per cent or more on Chinese goods this time round.