China Unveils Record $325B Stimulus To Supercharge Banks, Jobs & Growth

China announced on Saturday a substantial fiscal support package of $325 billion aimed at bolstering its economy over the next three months. This initiative represents the largest aid program since the global financial crisis and is intended to strengthen banks, support the property market, and enhance consumer spending.

The new stimulus builds upon a series of recent measures, including interest rate cuts and increased liquidity for banks. Finance Minister Lan Fo’an emphasized that China is prepared to implement further financial support, stating, “At present, we are accelerating the use of additional treasury bonds, and ultra-long-term special treasury bonds are also being issued.”

Lan detailed plans to arrange a total of 2.3 trillion yuan in special bond funds for various projects. The government aims to issue special bonds to assist major state-owned banks in replenishing their core tier-one capital, thereby improving their risk resilience and lending capacity to better support the real economy. Additionally, local governments’ debt ceilings will be lowered to facilitate increased spending on infrastructure and job protection.

This stimulus package exceeds analysts’ expectations of two trillion yuan and comes as China targets a growth rate of five percent this year. Although this figure is enviable compared to many Western nations, it marks a significant decline from the double-digit growth previously characteristic of the Chinese economy.

Economic uncertainty has led to low consumption levels, prompting policymakers to unveil various stimulus measures, including interest rate cuts and relaxed regulations on home purchases. Economists have indicated that more comprehensive actions are necessary to effectively address the economic downturn.

In a related move, China’s major banks announced plans to reduce interest rates on existing mortgages starting October 25. According to state media, most eligible mortgages will be adjusted to at least 30 basis points below the prime lending rate, with adjustments made automatically without requiring customer applications.

In recent weeks, the People’s Bank of China has also reduced interest rates on one-year loans to financial institutions, lowered reserve requirements for banks, and facilitated liquidity for stock purchases. The central bank introduced a 500 billion yuan “swap facility” to promote the healthy development of capital markets, further enhancing support for the economy.