Chinese President Xi Jinping and other top officials admitted Thursday that the world’s second-largest economy is facing new “problems” and vowed to find a solution to the long-running housing crisis.
Beijing unveiled a series of measures this week to boost its ailing economy, aiming to achieve five percent growth this year. Unbiased analysts say that is optimistic, given the many headwinds the country is facing.
On Thursday, the ruling Communist Party convened a meeting of its top body, the Politburo, to “analyze and study the current economic situation.”
“New situations and problems have emerged in the current state of affairs in the economy,” Xinhua news agency reported after the meeting, which Xi also attended.
“We must look at the current economic situation comprehensively, objectively and calmly, face the difficulties head-on and strengthen confidence,” it added.
Politburo members agreed that there is a need to “further improve the focus and effectiveness of policy measures” aimed at boosting the economy.
They also promised to “respond to the concerns of the population” over the economic malaise.
According to Xinhua, Beijing would “adjust policies on restrictions on housing purchases, lower interest rates on existing mortgage loans… and promote the development of a new model of real estate development.”
– ‘Positive step’ –
Thursday’s figures showed more substantial support for the economy may be on the way, Julian Evans-Pritchard, head of China economics at Capital Economics, said in a note.
“But concrete details are lacking and it is therefore difficult to assess at this point the size of any additional fiscal support,” he said.
According to Evans-Pritchard, state media also suggested the rate cuts could be bigger than previously expected: “Falling inflation and private sector deleveraging mean that rate cuts on their own will not dramatically boost domestic demand.”
On Thursday, the government also pledged to improve care for the elderly and young people and to aim for more jobs, especially among young people.
Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, said the meeting “covered key issues that need to be addressed, such as stabilizing the real estate sector and promoting the private sector.”
“The Politburo meeting stated that fiscal and monetary policies should be strengthened, but no quantitative guidance was given on the size of the fiscal stimulus,” he said in a note.
Overall, Zhang said he saw the messages from Thursday’s meeting as a “positive step towards addressing the economic challenges facing China.”
– Splash with the money –
Meanwhile, Bloomberg reported that officials were considering pumping more than $140 billion into the country’s major state banks, the first major capital injection since the 2008 global financial crisis.
The measure, which aims to give banks more room to lend to companies, would be implemented mainly through the issuance of “new special government bonds”, the report, citing sources familiar with the matter, said.
The details have not yet been finalized, it was added.
This week’s announcements, including major interest rate cuts and policies to boost home purchases, have been welcomed by investors, with stock prices in Shanghai and Hong Kong up more than nine percent so far this week.
But more work is needed if leaders are to meet their 5 percent target this year, analysts warn.
Recent economic figures have been disappointing: growth in the second quarter was lower than expected at 4.7 percent.
Youth unemployment rose to 18.8 percent in August, the highest level this year, according to official figures released last week.
This week’s stimulus measures represent a “shift to a more aggressive easing stance given continued weakness in domestic growth,” said Chaoping Zhu, global market strategist at JP Morgan Asset Management.
“The sense of urgency may convince investors that more policy support is on the way,” Zhu said.
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