The stakes have grown for this week’s conclave of the Standing Committee of the National People’s Congress, the executive body of the nation’s top legislature, as it’s expected to round out China’s largest effort to lift growth since the pandemic. The session in Beijing on Nov. 4-8 will probably unlock additional resources meant to take the pressure off local governments and recapitalize major state lenders, according to banks such as Goldman Sachs Group Inc. and HSBC Holdings Plc.
The outcome of the US election could also force Beijing to strengthen efforts to bolster domestic demand, given the threat by Republican nominee Donald Trump to impose hefty tariffs on Chinese goods if elected. The capital injection will aim to improve the capacity of state-owned banks to extend credit as they heed the government’s call to lend more at lower interest rates to help the economy. It’s an approach that’s narrowed margins to record lows and undermined their ability to boost capital with profits.
While a swap of 1 trillion yuan may add just 2 basis points directly to GDP growth, the boost would be “larger” if some proceeds from refinancing bond issuance can be used to repay overdue wages to civil servants and arrears to businesses, according to estimates by Goldman economists including Lisheng Wang.