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China Announces More Support For Economy But Holds Back On Major Spending Package
HONG KONG — On Tuesday, China’s economic planning body detailed steps geared at stimulating the economy, but avoided large spending projects.
The piecemeal nature of the proposals unveiled Tuesday appeared to disappoint investors who had hoped for bigger moves, and Shanghai’s index lost 10% of its initial gain as markets reopened after a weeklong holiday, trading only 3% higher.
The head of the National Development and Reform Commission announced that the government will frontload 100 billion yuan ($14.1 billion) in expenditure from the 2025 budget, in addition to another 100 billion yuan for construction projects.
China Announces More Support For Economy But Holds Back On Major Spending Package
Overall, spending was significantly lower than the multi-trillion yuan levels predicted by analysts.
Zheng Shanjie, chairman of the National Development and Reform Commission, said China was still on track to meet its full-year economic growth objective of roughly 5%. He did, however, concede that the economy is facing challenges and that the global climate is becoming “more complex and extreme”.
China’s policymakers have struggled to accelerate growth since the COVID-19 outbreak ended. A slowdown in the property market has exacerbated the situation since consumer spending has lagged and global demand has dropped.
In a note, UBS top China economist Tao Wang stated that the market was “likely expecting a significant fiscal stimulus.”
A small package of 1.5 to 2 trillion yuan ($210 billion to $280 billion) is more reasonable to expect in the short term, she added, followed by another 2 to 3 trillion yuan ($280 billion to $420 billion) in 2025.
In September, China launched a monetary stimulus package that included reductions in mortgage rates and the amount of reserves required to be held on deposit with the central bank. Those and other measures were the most forceful efforts so far to lift the property industry out of its slump and accelerate growth.
On Tuesday, the NDRC announced additional measures aimed at increasing investment and spending, as well as assisting small and medium-sized firms that face a competitive disadvantage against major state corporations.
China Announces More Support For Economy But Holds Back On Major Spending Package
To combat dropping housing sales and home prices, Zheng promised “comprehensive policy measures to help stop the decline in the real estate market.”
“In response to volatility and declines in the stock market, we will introduce a series of powerful and effective measures to strive to boost the capital market,” he stated, providing no further information.
SOURCE | AP
