New Delhi: China’s Standing Committee of the National People’s Congress on Friday gave its nod to the planned $1.4 trillion stimulus package to support debt-burdened local government bodies. As part of the stimulus package, the standing committee allowed local governments to raise their debt cap to 35.52 trillion yuan. This will result in an additional debt issuance of 6 trillion yuan over the next 3 years, Xinhua reported.
How markets received news of stimulus programme
The $1.4 trillion stimulus package was met with a lukewarm response by economists and markets alike. The Chinese yuan slipped 0.6 per cent to 7.189 per US dollar in offshore markets. The 10-year government bond yields were also reportedly down to their lowest mark since September this year.
According to economists, the debt bailout measures were inadequate to address the challenges faced by the Chinese economy. Macquarie Group’s chief China Economist Larry Hu said the newly announced measures will not be able to revive housing sector demand in the country. However, these measures were adequate to meet the 5 per cent growth target, he said.
UBS chief China economist Wang Tao concurred with Hu. According, to China specialist Victor Shih from the University of California, likened the move to kicking the can down the road, indicating that the underlying problems related to the real estate may not have been addressed by the bailout package.
Impact on Indian markets
The China debt bailout announcement hit the Nifty Metal Index which slumped nearly 7 per cent as 13 out of the 15 index participants turned red during the day’s trade on Friday. The Nifty metal Index was down 0.89 per cent on Friday, compared to a 0.10 per cent rise in the past 5 days. However, the Nifty metal index was down 4.96 per cent over the past month, but up 2.27 per cent in the past 6 months. The Nifty Metal index jumped over 40 per cent in the past year.
China’s National People Congress gave its nod to a massive $1.4 trillion stimulus package which aims to rescue debt ridden local governments. Know why markets are glum despite this development Economy Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
