While reiterating that the Chinese economy’s fundamentals remained strong, the leaders acknowledged that “some new situations and problems” had emerged. - AFP
SHENZHEN: China’s top leaders have pledged stronger support for the economy, in an atypical meeting on Thursday (Sept 26) that signals greater urgency on their part to address the country’s economic woes.
The Communist Party’s 24-man decision-making body, or Politburo, stressed the need to provide more fiscal and monetary support, stop the decline in the property market, and strive to achieve the country’s annual economic targets, which include gross domestic product (GDP) growth of around 5 per cent for 2024.
While reiterating that the Chinese economy’s fundamentals remained strong, the leaders acknowledged that “some new situations and problems” had emerged, according to an official readout from state news agency Xinhua that did not elaborate on the latter.
They called for a greater sense of responsibility and urgency in carrying out economic work, and for the roll-out of policies to be stepped up.
The timing of the meeting, chaired by Chinese President Xi Jinping, was unusual. Politburo meetings that focus on the economy do not typically take place in September.
This deviation from the norm “is likely due to a ramped-up urgency to attempt to meet this year’s growth target”, said Mr Lynn Song, chief China economist at ING Bank.
Two days earlier, on Sept 24, China’s financial regulators had unveiled the country’s largest monetary stimulus package since the Covid-19 pandemic – an announcement that was well received by investors.
Markets rallied again on Sept 26, with a blue-chip index for mainland Chinese stocks up by more than 4 per cent, and a separate index for property stocks up by 15 per cent, Reuters reported.
China’s economy has been contending with protracted deflationary pressures, weak domestic demand and a long-drawn property slump.
Its GDP growth slowed in the second quarter of 2024 to 4.7 per cent year on year, while key indicators such as industrial output and new home prices have been largely disappointing in August.
This has prompted banks such as Goldman Sachs and Citibank to lower their growth projections for the world’s second-largest economy to 4.7 per cent.
The Politburo meeting on Sept 26 stressed the need for increased counter-cyclical adjustments to fiscal and monetary policies and to “ensure necessary fiscal expenditures”. Such adjustments would include stimulus during slowdowns, for example.
As is usually the case, the official readout did not offer specifics as to the magnitude of these expenditures.
It also pledged to conduct “forceful” interest rate cuts – a strong tone that economists from investment bank Morgan Stanley said was unprecedented since 2012.
On the real estate front, the leaders called on officials to “stop the fall” of the property market – which reflects a “new KPI” – or key performance indicator – for policymakers, said economists Larry Hu and Zhang Yuxiao from financial services group Macquarie.
Measures mooted to stabilise the beleaguered sector include applying strict controls to the supply of new commercial housing, and easing restrictions on home purchases.
China’s property market has been in a protracted downturn, which has had ripple effects throughout the economy and dampened consumer sentiment. Home prices have continued to fall, even after a broad-based rescue package announced in May.
The Politburo meeting also highlighted the need to address employment, including for fresh graduates and migrant workers.
Youth unemployment rose to 18.8 per cent in August – the highest level since a new metric, which looks at non-students aged 16 to 24, was deployed last December.
The Chinese government on Sept 25 issued a sweeping 24-point set of guidelines to boost employment and job creation.
The pledges made by China’s top leaders were the latest in a barrage of recent moves to support the Chinese economy, unveiled just before the country’s 75th national day on Oct 1, which will see a seven-day nationwide public holiday.
They are also unlikely to be the last such moves.
The meeting marks a “turning point for a broad shift in policy stance”, said Macquarie’s Hu and Zhang, who expect more measures on the fiscal and property fronts to be announced in the coming weeks. - The Straits Times/ANN
