MARKET OVERVIEW - China's Fiscal Policy Announcement Disappoints

Allan von Mehren from Danske Bank argued that China's announcement regarding its fiscal policy was disappointing. China introduced a 6 trillion yuan local government debt swap program aimed at increasing transparency and reducing debt servicing costs by addressing hidden debts on balance sheets. Officials stated that local governments' hidden debts could fall from 14.3 trillion yuan to 2.3 trillion yuan due to these measures.

Mehren noted that the swap should have a positive effect on the incentives that local governments can provide to the economy, which are currently struggling with weak revenues due to expensive debts and declining land sales. However, he added, "With no figures given for fiscal stimulus, it still seems like we are waiting. China may still be looking for signals from the U.S. on tariffs."