CITIC Securities says as land-sale fiscal revenue wanes, Chinese local
governments will seek new funding sources and equity-based fiscal policy could
provide incremental financing. It splits equity fiscal into primary-market
operations—local authorities using guidance funds to co-invest in the primary
market to capture long-term capital appreciation—and secondary-market
channels—central and local SOE dividends and market-value revaluation to deliver
near-term proceeds. Referencing overseas experience, CITIC says equity fiscal
can only play a larger role if overall equity market capitalization rises
substantially; enlarging the equity market and sustaining a slow bull market are
therefore strategic priorities, which should enhance A-shares’ long-term
allocation value.
