The Ministry of Finance launched a 1 trillion yuan debt swap plan on Wednesday to help local governments refinance their debt burdens, after a similar move in March, lowering their interest costs and extending maturity dates of local government bonds.
It is hoped the moves will channel increased local government spending into more productive areas, and accelerate infrastructure investment in coming months, according to Fielding Chen, an economist at Bloomberg.
Despite the positive signs, economists warned that the risk of deflation intensified last month on the back of weak domestic demand, with CPI easing to 1.2 percent, and PPI remaining static at－4.6 percent, both lower than expectations.
Exports, though improving from record low spring levels, may continue to be heavily affected by global exchange rate swings and weak external demand, said Kuijs at RBS, adding further downside risks for overall economic growth.
"We think macroeconomic easing policies will continue in coming months," he said, "to ensure that GDP growth does not fall too much below 7 percent (set in March by the government)."
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