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China Watch: This is NOT stimulus. It’s a debt swap!

The stimulus being prepared by the NPC for announcement next week seems more like the work of a marketing agency than an economic council. While the numbers are substantial, it’s more of a debt swap than a true stimulus package. Here’s why!
2024-10-30

Welcome to the Weekly China Watch, where we examine the Chinese landscape through the lens of Western investors.

A month ago, flows into China surged following what seemed like a “whatever it takes” moment by Chinese authorities. However, these flows have since dwindled, and markets are growing weary of the “headline hockey” or “briefing bingo” from Chinese authorities, who continue to throw around billions and trillions through eye-catching headlines.

So, what about this new stimulus package, pre-announced by Reuters yesterday ahead of the NFP conference next week? Is it yet another marketing ploy, or does it genuinely matter? On the surface, the figures are substantial (amounting to over 8% of Chinese GDP), but they obscure a much bleaker reality.

Let’s explore why.

Chart 1: China only bringing down off-balance-sheet debt by so much

The stimulus being prepared by the NPC for announcement next week seems more like the work of a marketing agency than an economic council. While the numbers are substantial, it’s more of a debt swap than a true stimulus package. Here’s why!

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