S&P/ASX 200 Index (ASX: XJO) mining stocks are suffering today following some disappointing news out of China. The ASX 200 is down 0.4%, but some individual miners are down much further.
The BHP Group Ltd (ASX: BHP) share price is down 3.8%.
The Rio Tinto Ltd (ASX: RIO) share price has dropped 3.5%.
The Fortescue Ltd (ASX: FMG) share price is currently in the red by 5.8%.
The Mineral Resources Ltd (ASX: MIN) share price has declined 2.3%.
Other large miners such as Sandfire Resources Ltd (ASX: SFR) and South32 Ltd (ASX: S32) are also down. It's a sea of red.
Chinese economic support disappoints again
According to reports from various media outlets, including Reuters, China revealed a US$1.4 trillion debt package to help local Chinese governments.
Chinese officials increased the debt local governments were allowed to raise with special bonds by US$836 billion during the next three years.
This money will help repay existing debt, which has grown through local government financial vehicles (LGFVs). The Chinese government calls this debt "hidden debt" because, according to Reuters, local governments have used them to "circumvent the official debt limits."
On top of that, local governments will be allowed to use 800 billion yuan (US$111 billion) per year during the next five years in debt issuance to pay back loans, bonds and shadow credits of the LGFVs.
Reuters also reported that local officials who are responsible for "reckless borrowing" would be investigated and held accountable. China will reportedly accelerate LGFV reforms to better control debt.
Local governments have been struggling with high debt and falling revenue (because of property market pain), which has led to reductions in civil servant pay and delaying payments to contractors, hurting the real economy and making deflation worse.
No other financial measures were announced at this time, though Finance Minister Lan Foan said more support is coming. There were no details on the size and timing of those measures.
Reuters reported some analysts believe Beijing officials are saving financial ammunition for the potential tariff/trade war with the US.
What this means for ASX 200 mining stocks
Ultimately, this means there was no economic stimulus to help boost commodity prices, consequently affecting BHP shares, Rio Tinto shares, Fortescue shares, and all the other miners.
China was already wrestling with a difficult property market and elevated debt across various entities, so the prospect of a trade war makes the outlook even cloudier for the Asian superpower.
With the ASX and Australian economy exposed to China's commodity buying, the miners are in a difficult situation unless the Chinese economy can surprisingly rebound.
If economic stimulus from China has to wait until at least 2025, it could be a challenging period for ASX 200 mining stocks.
