The Chinese government on Friday approved a $1.4 trillion plan to revive the economy, authorizing local governments to refinance ballooning debts that have left some cities unable to sustain services and pay their bills.
The move caps a series of steps China’s leaders began in September to stimulate growth, an effort that took on greater urgency this week with the election of Donald J. Trump as president of the United States. Mr. Trump has promised to wage economic warfare with China, saying he would put additional tariffs as high as 60 percent on Chinese goods imported by the United States.
China’s economy has struggled to regain momentum this year. The grinding collapse of the real estate market, where most Chinese households build their wealth, has left people reluctant to spend. Home prices have fallen about 10 percent a year for the past three years, and foreclosures are soaring.
At the same time, local governments have piled up unsustainable levels of debt. For years, they drove growth by borrowing massive sums of money to pay for infrastructure projects. Then they took on even more of debt during the Covid-19 pandemic.
But despite the mounting problems facing the economy, China’s top leaders, until six weeks ago, held back from taking significant steps to break the cycle. Beijing has historically favored state-led growth rather than direct consumer stimulus. In late September, the government took action and made it easier for households and companies to borrow.
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