China has announced a series of measures to boost its economy and support local governments in meeting their economic targets. The National Development and Reform Commission (NDRC) has allocated 200 billion yuan ($28 billion) for investment projects by local governments this year. Zheng Shanjie, the commission’s chairman, expressed confidence in achieving the annual economic and social development goals during a press conference in Beijing.
China had set a 5% target growth rate in March, but weak economic data over the summer raised concerns among economists about meeting this goal. To assist struggling local governments, Beijing will provide 100 billion yuan ($14 billion) from the central government’s budget and an additional 100 billion yuan for investment projects. Economists had been expecting further fiscal measures totaling about 2 trillion yuan ($285 billion) to be announced this month, following Chinese leader Xi Jinping’s approval of a significant growth plan.
Fred Neumann, chief Asia economist for HSBC, noted that the NDRC provided a clear message about policymakers continuing with a pro-growth stance. However, investors were disappointed at the lack of details on new fiscal measures, which are urgently needed to accelerate growth on a sustainable basis.
China’s fiscal support measures
The measures announced in recent weeks have primarily focused on monetary policy, while fiscal measures involve taxation or other approaches to impact public spending more directly. Despite the government’s announcements, stock markets in Hong Kong and mainland China showed a mixed reaction. Many economists believe more substantial actions are required to restore consumer confidence.
Jia Kang, the former director of a think tank affiliated with the Ministry of Finance, suggested that Beijing should issue up to 10 trillion yuan ($1.4 trillion) in long-term government bonds to fund infrastructure and public works. In addition to these fiscal measures, the People’s Bank of China recently announced a cut in one of its main interest rates and reduced the required cash reserves for banks. Mortgage rates were also cut, and the minimum downpayment for second-time homebuyers was lowered to support the struggling property sector.
The government has also promised to support the stock market and introduced cash handouts for disadvantaged citizens and subsidies for job-seeking recent graduates. The Communist Party’s Politburo emphasized the urgency of addressing “new situations and problems” in the economy and vowed to increase fiscal spending, stabilize the property market, and improve employment opportunities for fresh graduates and migrant workers.
