In an effort to continue sparking economic growth, the government of China could add an additional round of stimulus measures. The second largest economy has been reeling from the effects of a real estate crisis. But the country has taken recent steps to shore up the sector.
Less stringent loan qualifications, lower interest rates have been implemented to try to prop up a struggling real estate sector. The sector comprises a significant portion of China’s GDP. So it’s important for the government to address that issue first to prevent contagion in other sectors.
“In China, weakening economic momentum, a deepening property-sector downturn, and growing strains on local-government financing weigh heavily on market sentiment,” an IMF report said.
“Continued turmoil in the property sector could spread to the financial sector and to local governments with significant dependence on property-related revenues, weighing on the already-weakening recovery,” the IMF added.
Realizing this, China’s government is looking to prep its budget to make room for more stimulus. Of course, that will require fiscal limits to be stretched beyond the initial forecasts.
“China is considering raising its budget deficit for 2023 as the government prepares to unleash a new round of stimulus to help the economy meet the official growth target, according to people familiar with the matter,” reported Bloomberg.
“Policymakers are weighing the issuance of at least 1 trillion yuan ($137 billion) of additional sovereign debt for spending on infrastructure such as water conservancy projects, said the people, asking not be identified, discussing a private matter,” the report added, noting that it “could raise this year’s budget deficit to well above the 3% cap set in March, one of the people said.”
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If the stimulus measures prove to be successful, then it could benefit the KraneShares CICC China Leaders 100 Index ETF (KFYP ). China continues working on its economic growth. Equities could be at a relative value and thus give investors low prices to capitalize on for future strength.
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