China has unveiled a substantial 6 trillion yuan ($839 billion) refinancing plan to address mounting local government debt, as the nation’s policymakers confront a slowing economy and new uncertainties following Donald Trump’s re-election as U.S. president. The program, designed to stabilize local government finances, will be executed over the next three years by allowing local governments to issue special bonds to swap out hidden debts.

The refinancing initiative, approved by the Standing Committee of the National People’s Congress, increases the debt ceiling for local governments to 35.52 trillion yuan. According to the state-run Xinhua News Agency, this move will enable local governments to issue 6 trillion yuan in special bonds, easing the financial strain on debt-laden municipalities and supporting economic stability.

“This is a major policy decision that takes into account both international and domestic factors, aiming to ensure stable economic and fiscal operations as well as respond to local governments’ development needs,” said Lan Shaomin, Deputy Secretary-General of the Standing Committee.

The measure comes as China’s economic growth dipped to 4.6% in the third quarter, marking the slowest pace of expansion since early 2023. The downturn has put pressure on the government’s ability to meet its annual growth target of around 5%. In response, Chinese policymakers have recently introduced a suite of support measures, including interest-rate cuts and stimulus for the stock and real estate sectors. This policy shift, initiated in late September, led to a surge in the stock market and inspired global financial institutions such as Goldman Sachs to raise their outlook for China’s $18 trillion economy.

However, the re-election of Trump, who has consistently threatened tariffs on Chinese exports, has heightened concerns about potential trade disruptions. Analysts suggest Beijing may respond by further stimulating domestic demand to reduce its reliance on exports to the U.S.

With this large-scale debt swap, China is tackling its local government debt crisis and aiming to fortify its economy against both internal weaknesses and external pressures.