In a move that underscores its commitment to achieving this year’s economic growth target of around 5%, Chinese leadership pledged on Thursday to implement “necessary fiscal spending.” This approach comes in response to new economic challenges, raising market expectations for a fresh stimulus package on top of those announced earlier this week.
These pledges included clear directives to the government to bolster household consumption and support the stabilization of the struggling real estate market. These guidelines were part of an official statement following the monthly meeting of the Communist Party’s top political body. It is noteworthy that the September meeting is not usually a platform for macroeconomic policy discussions, which reflects growing concerns about the noticeable slowdown in economic growth momentum.
China, the world’s second-largest economy, is facing strong deflationary pressures due to a sharp downturn in the real estate market and weak consumer confidence. This has revealed its heavy reliance on exports in an increasingly tense global trade environment.
In recent months, a wide range of economic data has missed expectations, raising concerns among economists that the growth target might be at risk, and that a longer-term structural slowdown could be on the horizon.
In this context, the People’s Bank of China unveiled on Tuesday its most significant monetary easing package since the COVID-19 pandemic. This included broad interest rate cuts and a liquidity injection of 1 trillion yuan ($140 billion) into the financial system, among other measures.
Additionally, media reports indicated that Beijing is considering injecting up to 1 trillion yuan into its largest state-owned banks to increase their capacity to support the struggling economy, primarily through issuing new special sovereign bonds.
