China’s President Xi Jinping has vowed to go "all out" to revive the country's struggling economy, unveiling a sweeping set of fiscal and monetary measures. During a rare September Politburo meeting, Xi emphasized the urgent need to bolster the private economy, stabilize the battered real estate sector, and boost the stock markets. This comes amidst mounting concerns over China’s slowdown, deflation risks, and growing global investor skepticism.
Xi's administration announced a third consecutive day of intervention, highlighted by significant fiscal stimulus, including potential bank injections amounting to 1 trillion renminbi (roughly $142 billion). The policies aim to offset deflationary pressures that have caused widespread damage to China’s private firms and real estate market. Officials reaffirmed the government’s goal of achieving a 5% growth target for 2024, signaling an intensified focus on driving domestic demand.
China revealed a huge stimulus package to boost liquidity, help its economy, & prop up its stock market.
It is making a $113-billion facility to boost lending & let banks borrow money to buy Chinese stocks.
The PBOC promises more stimulus if this isn't enough.@TheyaBitcoin pic.twitter.com/pl2V6NlM8o
— Joe Consorti ⚡️ (@JoeConsorti) September 24, 2024
Xi's decision to convene an unscheduled economic meeting underscores the sense of urgency as China struggles to regain momentum. In recent months, the real estate sector has been one of the hardest-hit areas, with plummeting property values adding to economic woes. Notably, the Politburo shifted from its previous stance that “homes are for living, not for speculation,” signaling a more aggressive approach to preventing further declines in property prices.
To further support the private economy, Xi pledged to make capital more accessible, encourage share buybacks, and strengthen fiscal support for enterprises. Beijing's focus has turned sharply towards infrastructure investments, with the central government planning to issue special-purpose local bonds alongside central government funds. However, while the central bank has cut interest rates and injected liquidity, economists note that more dramatic measures akin to the 2008 stimulus package have yet to materialize.
Biggest monetary stimulus since COVID to prop up China's cratering property bubble, largest ever property bubble in the world.
The Chinese economy is in danger of missing its growth target this year so badly that even the made-up numbers China reports can't make up for the… pic.twitter.com/LidkQU2Skb
— OЭDIРOVICH (@oedipovich) September 26, 2024
The situation in China has garnered global attention, with markets reacting positively to the news. The CSI 300, a benchmark of China’s top stocks, surged over 4%, recovering much of the year’s losses. The moves by Beijing come at a time of considerable unease over China’s longer-term prospects, with foreign investments stalling, export growth dwindling, and high youth unemployment exceeding 20%. Despite these challenges, Xi urged Chinese officials to act swiftly, stressing that the government must demonstrate resolve and "dare to innovate" in confronting economic stagnation.
China's stock markets, which have been in a prolonged slump, were buoyed by Xi’s reassurances, with analysts predicting further interventions if these initial steps fail to boost growth. Market watchers are closely monitoring the effectiveness of these measures, particularly the extent to which government-backed investment and corporate stimulus can reverse the downturn. While some investors remain cautious, China’s leadership insists that these moves are critical to achieving sustainable, high-quality growth.
The meeting also addressed the need for job creation and social welfare improvements as part of the broader economic recovery plan. Xi emphasized the importance of stabilizing the workforce and providing safety nets for Chinese citizens. In his remarks, he called on party cadres to assume responsibility, warning that inertia would not be tolerated during such a critical period.
Overall, China’s sweeping economic measures demonstrate its commitment to reversing the economic decline, but much depends on how far these policies can go in resolving structural issues like debt and overcapacity. Beijing’s actions signal a willingness to adapt, but whether this will be enough to meet ambitious growth targets remains to be seen.
