After Donald Trump’s recent election as the next US president and the possible increase in trade tensions that this may bring, China has announced a 10-trillion-yuan (US$1.4 trillion) fiscal stimulus package to hedge any potential risks and help boost its economy.

China’s minister of finance Lan Fo’an, following the conclusion of China’s congress meeting on November 8, made public that China, over five consecutive years, will arrange for the issue of 800 billion yuan worth of central government bonds per year dedicated to relieving the debt weighing down local government balance sheets – namely, burdensome debts raised by these entities using local government financing vehicles.

This 4-trillion-yuan fiscal stimulus, plus a 6-trillion-yuan fiscal package approved at the congress meeting, amount to 10 trillion yuan, and it is directly aimed at alleviating China’s local government debt hangover and increasing spending to support its slowing economy.

“By 2028, the stimulus will help local governments’ balance sheet debt,” Lan says, “reducing it from 14.3 trillion yuan to 2.3 trillion yuan and greatly easing their burden.”

The plan for the 10-trillion-yuan fiscal stimulus had been alluded to during last month’s Ministry of Finance press briefing, at which Lan indicated that a one-off debt swap programme, the strongest in recent years, would be launched.

The time of announcement for the stimulus also reflected risks that may come with Donald Trump being selected as the next US president, resulting in increased tariffs and other anti-trade policies against China. The market believes there will be more policies that support China’s domestic economy once Trump’s policies become clearer.