China has unveiled a colossal £1.1bn rescue package aimed at propping up its sluggish economy amid global trade pressures, particularly from the United States following Donald Trump’s crackdown. Presidential elections win.

The announcement, made yesterday by China’s National People’s Congress, is primarily focused on helping local governments restructure massive debts built up over years of infrastructure and real estate investment.

However, the plan left investors disappointed, with more direct support for household consumption expected to boost the world’s second largest economy.

China’s Finance Minister Lan Fo’an said the government was aiming to stabilize local finances and refocus spending on essential public services.

He said: “This is one of the biggest measures we have seen directed at local government debt.”

Under the bailout, Beijing will authorize local governments to issue bonds for three to five years to restructure about 14 trillion renminbi (Rmb), or yuan, in “hidden” debt.

The debt is largely the result of local governments’ off-balance sheet financing instruments, which have been heavily invested in real estate and infrastructure but have struggled since China’s housing crisis.

Lan added: “We expect this restructuring to free up resources previously constrained by debt and allow local governments to focus on development and improving public welfare.”

While the announcement was an important move, markets responded cautiously. The renminbi fell 0.3 percent to just above Rmb7.16 against the dollar, while Chinese bond yields edged lower.

Mitul Kotecha, head of emerging markets macro strategy for Asia at Barclays, said: “There is a sense of disappointment.

“The housing sector needs serious structural reforms.

“Without addressing these deeper issues, no fiscal package will fully protect the economy from external shocks.”

Investors were hoping for measures that could boost household consumption to boost domestic demand, Mr Kotecha explained.

He added: “Expectations were high for a massive stimulus package, but the outcome was quite disappointing.”

The plan authorizes £660bn of new bonds to address existing debt over the next three years, with an additional £4bn reallocated from previously planned bond issues.

These moves will allow these authorities to consolidate debts previously held by their financing vehicles and take direct responsibility for those debts.

Lan said the change should reduce borrowing costs by around £66bn, making debt servicing more sustainable.

He noted: “We are intensifying counter-cyclical adjustments,” indicating that China may take further action depending on the outcome of future negotiations with trade partners such as the US.

China faces further pressure with the prospect of renewed trade tariffs from the United States under the Donald Trump administration. Trump has previously signaled a willingness to impose a 60 percent increase in tariffs on Chinese goods, which analysts say could further hurt China’s export-dependent sectors and cost the economy several percentage points of growth.

Larry Hu, economist at Macquarie, said: “The goal of policy is not to revive the economy, but to stabilize it amid mounting challenges.

“The measures are meant to support growth rather than advance it.”