China’s Ministry of Finance announced on Saturday plans to increase borrowing to assist cash-strapped local governments and strengthen state-owned banks in response to a significant economic downturn, particularly in the real estate sector. Finance Minister Lan Fo’an indicated that while specific borrowing and spending figures were not disclosed, a comprehensive plan was being formulated to address weak domestic consumption and stabilize the real estate market. This announcement follows a series of economic stimulus actions implemented last month, which initially boosted stock markets but faced declines as investors expressed concerns over the government's adequacy in addressing the economic challenges. The ministry's strategy includes providing financial support to the largest banks in the country, enhancing their capacity to absorb losses and continue lending to support economic growth. Lan emphasized the necessity for local governments to generate revenue through asset sales, despite many municipalities being hesitant to sell properties amid falling real estate prices. He also assured ongoing investigations into local government financial expenditures, responding to public concerns regarding potential misconduct that may have exacerbated financial distress among state-owned enterprises and localities. Economists, such as Alicia Garcia-Herrero from Natixis, expressed disappointment over the lack of specific fiscal stimulus figures but acknowledged a positive intent from the finance ministry to rebalance the growth model. Notably, Jia Kang, a veteran finance official, suggested that the central government should consider borrowing up to $1.4 trillion via additional bond sales to fund long-term infrastructure projects and assist local governments. The central bank and financial regulators have already implemented measures to boost bank lending, including interest rate reductions, and the ruling Communist Party has called for further actions. However, any significant increase in national spending requires approval from the standing committee of the national legislature, which is expected to convene at the end of this month. Recent data indicates a marked decline in consumer spending in China, with many restaurants in urban areas closing or operating at reduced capacity. The real estate market has seen substantial price drops, eroding household wealth and leading families to restrict spending. Consumer confidence remains notably low, with the latest measures indicating the worst sentiment since 1990, except for a period during the pandemic. Despite a temporary rise in the CSI 300 index following the government's stimulus initiatives, market fluctuations have raised doubts about the effectiveness of the government's economic response. Local and provincial governments are facing financial challenges, as traditional revenue streams from land sales have diminished, and there is a pressing need for funds to cover operational costs rather than just infrastructure projects. The finance ministry is planning to issue special bonds to assist local governments in purchasing vacant apartments for affordable housing initiatives.