Fiscal moves urged to spur economy

As markets await China to unveil its economic policy roadmap for the second half, economists and policy advisers have renewed calls for ramping up fiscal stimulus measures to address persistent challenges in the property sector and local government debt.

Despite progress in bolstering consumption — particularly through trade-in programs in the first half, weak property market performance and fiscal strain on local governments could limit further recovery in consumption and investment, they said.

This may necessitate measures such as approving additional central government bonds to set up a national fund to more decisively stabilize the property market while speeding up the restructuring of local government debt, they added.

"From the second half of last year to this year's first half, the focus of public attention was mainly on the tariff war and the expansion of domestic demand — with a focus on boosting consumption," said Luo Zhiheng, chief economist at Yuekai Securities.

"However, in fact, the issues of real estate and local debt remain very important factors affecting China's economy," Luo said, given the property sector's massive scale and ongoing adjustment and local governments' crucial role in public spending and macroeconomic policy implementation.

Luo suggested accelerating the restructuring of implicit local government debt and issuing additional central government bonds to establish a national real estate stabilization fund.

"An initial size of around 2 trillion yuan ($278.8 billion) could be considered, dedicated to ensuring housing project deliveries, acquiring unsold housing stock and purchasing idle land held by developers, thus easing liquidity pressure on real estate enterprises and sending a strong signal of stopping the decline and stabilizing the property market."

Cao Jing, an associate researcher at the Institute of Finance & Banking of the Chinese Academy of Social Sciences, also advocated leveraging national credit to help resolve liquidity pressure facing real estate developers.

"A real estate stabilization trust fund should be established to provide liquidity support for key developers, helping curb the spread of debt default risks," Cao said, adding that all necessary policies to stabilize the property market should be rolled out to dispel market participants' wait-and-see sentiment.

Their remarks came as markets are closely awaiting clues from the top leadership to chart the course for China's macroeconomic policies in the second half, after a 5.3 percent first-half GDP growth, with a full-year target of around 5 percent.

Zhang Bin, a nonresident senior fellow at the China Finance 40 Forum and a national political adviser, said that while the full-year GDP growth target should be well within reach, the challenge of insufficient demand — and thus pressures on the labor and capital markets — may intensify in the second half amid property market weakness and the unfolding impact of US tariffs on exports, which has necessitated further fiscal stimulus moves.

Li Daokui, dean of the Institute for Chinese Economic Practice and Thinking at Tsinghua University, suggested significantly expanding long-term sovereign bond issuances to restructure local government debt and purchasing unsold housing stock.

Contact the writers at zhoulanxv@chinadaily.com.cn