Texture from Sinocism on new stimulus measures:
More policy support for the economy coming, certainly not like the flood-like stimulus of previous downturns, but drips of stimulus continue to dribble out.
Further steps will be taken to ensure the stability of employment, the financial sector, foreign trade, foreign investment, domestic investment and expectations, according to a statement released after a State Council executive meeting chaired by Premier Li Keqiang…
Policy tools such as overall and targeted cuts of required reserve ratios will be taken in a prompt manner to encourage financial institutions to channel more capital into inclusive financing, enhancing support for the real economy, small and micro firms in particular.
The meeting urged acceleration in issuance and use of special local government bonds. New additional bonds quota for the next year can be delivered ahead of the original schedule.
The bonds should be mainly used to finance transport infrastructure projects like railways and urban parking lots, energy projects such as natural gas networks and storage facilities, as well as environmental protection and social security projects.
The fund must not be used for land stocking, real estate development, debt swaps and projects that can be commercially operated, the statement said
Accelerating the issuance and use of special local government bonds can help deepen supply-side structural reform, counter the downward economic pressure, and boost effective investment. General Secretary Xi Jinping emphasized at the Central Economic Work Conference last year the need to increase the size of special local government bonds by a fair amount to support major projects under construction and strengthen areas of weakness. Premier Li Keqiang underscored in the Government Work Report the imperative to make effective use of local government bonds and expand their scope of use as necessary…
“Our measures must be well-targeted. There needs to be solid activities in the real economy before the end of the year,” Premier Li said. “The scenario where the ‘funds chase after projects’ must be avoided.”
The meeting urged greater efforts in project management and preventing “half-finished projects”. ..
According to statistics from the Finance Ministry, between January and August, a total of 2.0057 trillion yuan in special bonds were issued in China, accounting for 93.3 percent of this year’s planned quota.
Usually, local governments submit their borrowing needs for the following year in October and November. The National People’s Congress (NPC), China’s top legislature, generally approves a quota at its annual session in March of the next year. Then after the Ministry of Finance assigns approved quotas, local governments normally start bond issuance as early as April.
In an unusual move, the NPC passed a bill last December allowing the cabinet to assign bond quotas so that local governments could start issuing debt as early as January as part of efforts to stimulate the economy.
Liu He attended a nationwide teleconference discussing the “financial situation” and policies to address financial risks. The meeting again said the economy now faces more downward pressure given the “new situation” inside and outside China, and that officials must stay alert to the risks and preempt the crisis.
Pretty much as expected. Not enough to prevent further falls in steel demand as realty joins industry in contraction. With developers purchases of land cratered 30% year on year, local government are struggling to spend anyway.
To the charts:
Spot down down. Paper more. Steel did not update.
Prices going lower yet.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
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