China is considering more than 1 trillion yuan in fiscal stimulus over the next three years, according to a latest report from a top Chinese investment bank, the China International Capital Corporation (CICC). China holds significant firepower that it could unleash to boost the world’s second-largest economy.
A total of 1.2 trillion yuan ($188 billion) to 1.5 trillion yuan may be taken from the government coffers to replenish capital for investment projects, mainly those already approved by the authorities, the investment bank estimated.
The move comes as China’s economy is still growing at its slowest pace in 25 years with little sign of an immediate turnaround even after months of monetary easing.
CICC said in its report that the stimulus is likely to drive a total potential investment of 5 trillion yuan to 7 trillion yuan in the next three years, or 2.5 per cent to 3.4 per cent of the 2015 GDP each year.
Investment projects will be funded by policy banks and commercial lenders and private investors via public-private partnership.
The report came after China’s Ministry of Finance on Tuesday put forward multiple fiscal policies aimed at stabilizing growth, such as coordinating funds to accelerate project construction, activating idle money and widening tax breaks.
The move indicated that China’s fiscal policy will be “firing on all cylinders to support growth”, the CICC said.
CICC has played a key role in advising the Chinese government on state-owned enterprise reform and guiding the listing of the country’s major overseas IPOs. It has offices in Hong Kong, New York, London and Singapore.
China is battling a property downturn, industrial overcapacity, sluggish demand and struggling exports, which dropped growth to 7 per cent for the first half of the year.
The Communist Party’s Politburo pledged in July to make “pre-emptive” policy adjustments in the second half.
CICC was formed in 1995 by Morgan Stanley and China Construction Bank Corp. as China’s first Sino-foreign joint-venture investment bank. Morgan Stanley sold its stake in December 2010 to a consortium that included GIC; Great Eastern Holdings Ltd., the insurer controlled by Oversea-Chinese Banking Corp.; and private-equity firms KKR and TPG Capital.
TBP and Agencies