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BEIJING — China's Ministry of Finance press briefing over the weekend underscored how it is focused on tackling local government debt problems, instead of the stimulus markets have been waiting for. In his opening remarks on Saturday, Minister of Finance Lan Fo'an laid out four measures, starting with increasing support for local governments in resolving debt risks. It was only after he outlined those four points that Lan teased that the country was looking to increase debt and the deficit. "The press conference is consistent with our view that addressing local government financing struggles is a priority," Robin Xing, chief China economist at Morgan Stanley, and his team said in a report Sunday. They also expect that the central government will play a larger role in debt restructuring and housing market stabilization. "However, we believe upsizing consumption support and social welfare spending will likely remain gradual," the Morgan Stanley analysts said.

China's real estate market slump has cut into a significant source of revenue for local governments, many of which struggled financially even before needing to spend on Covid-19 measures. Meanwhile, lackluster consumption and slow growth overall have multiplied calls for more fiscal stimulus.

The four policies announced by the Ministry of Finance are focused more on tackling structural issues, Chinese economic think tank CF40 said in a report Saturday. "They are not specifically aimed at addressing macroeconomic issues such as insufficient aggregate demand or declining price levels through Keynesian-style fiscal expansion," the report said, in reference to expectations of greater government intervention. CF40 estimates China does not need additional fiscal funding to achieve the full-year growth target of around 5%, as long as the spending that it has already announced happens by the end of the year.

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