Xi Jinping's First Visit to the People's Bank of China and Expansion of Deficit Financing: "Commitment to Economic Support"

Chinese President Xi Jinping visited the central bank, the People's Bank of China, for the first time since taking office, signaling his commitment to support the economic and financial sectors.

According to Bloomberg on the 24th (local time), President Xi visited the People's Bank of China and the State Administration of Foreign Exchange in Beijing along with Vice Premier He Lifeng and others. It is reported that President Xi received a briefing on China's foreign exchange reserves, which amount to $3 trillion (approximately 4,042.5 trillion KRW).

[Image source=Yonhap News]

On the same day, the Standing Committee of the National People's Congress (NPC), China's parliamentary body, decided to increase the size of the fiscal deficit to 3.8% of the Gross Domestic Product (GDP). This is an increase of 0.8 percentage points from the 3% decided at the NPC in March. Revising the fiscal deficit size decided at the March NPC is an unusual move except in special circumstances such as the 1998 Asian financial crisis or the 2008 Sichuan earthquake.

Earlier, China decided to issue an additional 1 trillion yuan (approximately 184.1 trillion KRW) in government bonds in the fourth quarter for disaster relief and construction purposes. This stimulus measure corresponds to 0.8% of GDP, and the government plans to raise funds through bond issuance and then transfer them to local governments.

The announcement of the fiscal deficit expansion on the same day as President Xi's visit to the People's Bank of China is also seen as a demonstration of the government's intention to stimulate the economy. Bloomberg assessed, "The budget revision reflects the government's concern for next year's economic outlook and strengthening the economy and financial markets." Mark Williams, Chief Asia Economist at Capital Economics, told Bloomberg, "The approved additional fiscal support is the measure we expected," adding, "It was necessary to prevent a sudden fiscal tightening in China at the end of this year."

Earlier, China's National Bureau of Statistics announced that China's GDP growth rate for the third quarter of this year was 4.9%, exceeding market expectations of 4.4%. Accordingly, if China achieves 4.4% growth in the remaining fourth quarter, it will easily meet this year's target of around 5.0%. However, Bloomberg forecasts that due to ongoing real estate turmoil and deflationary pressures, the annual economic growth rate may slow to 4.5% next year.

This content was produced with the assistance of AI translation services.