The Chinese government is preparing a new round of fiscal measures for the rest of the year to stimulate business and consumer credit, as China's economy is likely to grow below the 4.5 to 5 percent target set by the government for this year. Liao Min, Vice Minister of Finance of China, said today that the Chinese government is studying and drafting a new set of coordinated fiscal and financial measures, which will be rolled out gradually in the second half of this year. These measures have been expanded further since August 1, making more types of loans eligible for interest subsidies, especially loans for small and medium-sized businesses and for consumers. China's Ministry of Finance will issue guidelines for local government bond issuance, speed up budget disbursement, and strengthen oversight of areas where spending has been slow, in order to push projects to start more quickly. The Chinese government also plans to take serious steps to curb new hidden debt, and will systematically review tax reduction measures announced in the past, with the goal of ending or adjusting some of them to address fragmented policies and reduce distortions in market mechanisms.
Fiscal stimulus and credit expansion may increase bond supply and inflation expectations, pressuring yields higher.
