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China’s leaders have vowed to spur consumer spending, tackle unemployment and give more support to the ailing property sector as the world’s second-largest economy makes a “tortuous” recovery from the pandemic.
But the promises of more stimulus in the second half of the year from the Communist party’s ruling politburo were light on details and unlikely to reassure investors worried by disappointing growth in the second quarter.
A readout from a keenly awaited meeting of the 24-member politburo on Monday said it believed the economic recovery was making “tortuous progress” and it was “necessary to actively expand domestic demand” and “expand consumption by increasing residents’ income”.
“It is necessary to boost the consumption of automobiles, electronic products and home furnishing, and promote the consumption of services such as sports, leisure, and cultural tourism,” the meeting said, according to a report by state news agency Xinhua.
After initially bouncing back following the easing of draconian Covid-19 restrictions in December, China’s economy grew less than 1 per cent in the second quarter compared with the previous three months as business and consumer confidence lagged.
The country’s once-mighty property sector, which has suffered a collapse in demand following restrictions on leverage in recent years, slipped further in the second quarter after a stronger start to the year.
Julian Evans-Pritchard, head of China economics at Capital Economics in Singapore, said the announcement’s lack of detail on the scale of the promised measures meant investors would remain in wait-and-see mode. “Given how bad things are at the moment, it’s a bit disappointing that they didn’t give us some figures,” said Evans-Pritchard.
He said China’s leadership was clearly concerned. The statement mentioned “risks” seven times, up from three times in the more optimistic conclusions of the previous politburo meeting dedicated to the economy in April.
But “they are not so desperate that they feel the need to resort to the old-school, big-bang stimulus” of the sort used after the 2008 global financial crisis, Evans-Pritchard said.
The government last month eased policy interest rates and this month extended credit support for developers, while also trying to reassure business that a regulatory crackdown on internet entrepreneurs in recent years was over.
“It is necessary to . . . encourage enterprises to dare to venture, dare to invest, dare to take risks, and actively create markets,” the politburo said on Monday.
Among other measures, it promised to accelerate the issuance of local government special bonds. Many heavily indebted local governments need funds to pay salaries and undertake investment activities.
It also said the government needed to “stabilise” foreign trade and foreign investment, both of which have been under pressure, and to increase international flights, which have yet to fully recover from the pandemic.
The politburo also emphasised the problem of employment, saying it would be given strategic priority. Youth unemployment in China has hit record levels, although broader official unemployment rates are stable.
The statement said the external environment was “complex and severe”, but that leaders remained confident in the recovery.
“Our economy has enormous development resilience and potential, and the long-term positive fundamentals have not changed,” it said.
The meeting followed a slew of support measures announced by Chinese regulators in recent days, including action to stimulate consumption of manufactured items such as cars and electronics after a fall in factory activity.
Chinese real estate stocks fell to their lowest level in more than eight months in Hong Kong ahead of the politburo statement, as concerns over a liquidity crunch at two of the biggest developers, Country Garden and Dalian Wanda, hit the sector. The Hang Seng mainland properties index closed down 6.42 per cent on Monday.
Some analysts noted that the politburo statement omitted President Xi Jinping’s trademark statement that “houses are for living in, not for speculation”, saying it could signal the government would further ease restrictions introduced in previous years to cool the market.
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