China’s slowdown recently forced the People’s Bank of China to cut key interest rates on long-term loans to ease property slumps and lockdowns. Meanwhile, as doubts grow that China will recover from past economic downturns, policymakers are bracing for the second round of stimulus: an infrastructure glut. Bloomberg reports that China’s finance ministry is considering allowing local governments to sell a whopping 1.5 trillion yuan ($220 billion) of “special” local bonds in the second half of the year. People said the bonds would boost the struggling economy. “Bond sales will be pushed out of next year’s quota,” according to the people, who asked not to be named because it has yet to be officially announced. While the issuance of local bonds – one of the few parts of China’s economy where there is excess debt capacity – is nothing new, this would be the first time “the issuance has been done quickly in this way, underscoring growing concerns in Beijing on the plight of the world’s second-largest economy … previously local governments didn’t start selling debt until January 1, when the new fiscal year begins.” China is desperately trying to offset the downward pressure on the economy by restoring its old playbook to increase infrastructure spending to cushion the economy in times of economic distress. If the country’s legislature approves the proposal, it would add to the 1.1 trillion yuan ($164 billion) in new infrastructure support unveiled last month. Economists polled by Bloomberg had forecast the economy to grow around 4.1 percent this year, missing Beijing’s growth target of 5.5 percent. It seems that promoting growth is a move by the government to compensate for the economic downturn. While it is standard practice for local governments to make proposals for the coming year, that process typically begins in the last quarter of each year, one of the people said. Some provinces were told to start new projects when possible, even if construction was originally scheduled to start next year, one of the people said. – Bloomberg Chinese stocks closed in the green on Thursday. The benchmark CSI 300 index closed up about half a percent and is up nearly 19% since hitting a low in late April. After plunging in recent days, commodities caught a steady bid on expectations that China will re-emerge as a major buying power as it prepares to build a whole new batch of ghost towns. From Zerohedge.com More top reads from Oilprice.com:
