China’s leadership, including President Xi Jinping, acknowledged on Thursday that the economy is encountering new “problems” and committed to addressing the ongoing housing sector crisis, according to state media.
This week, Beijing introduced a series of measures aimed at revitalizing its struggling economy, with a target growth rate of five percent for 2024—an ambitious goal given the existing challenges.
During a Politburo meeting on Thursday, which included Xi, officials gathered to “analyze and study the current economic situation.”
Xinhua news agency reported, “Some new situations and problems have emerged in the current running of the economy.” They emphasized the need to “view the current economic situation comprehensively, objectively and calmly, face difficulties squarely, (and) strengthen confidence.”
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Members of the Politburo agreed on the necessity to “further improve the focus and effectiveness of policy measures” designed to stimulate economic growth. They also expressed their commitment to “respond to the people’s concerns” regarding economic struggles.
Xinhua noted that the government plans to “adjust housing purchase restriction policies, lower interest rates on existing mortgage loans… and promote the construction of a new model for real estate development.”
This meeting coincided with a Bloomberg report indicating that Beijing is contemplating injecting over $140 billion into major state-run banks, marking the first significant capital infusion since the 2008 global financial crisis. This measure aims to enhance banks’ capacity to lend to businesses, primarily through the issuance of “new special sovereign bonds.”
Although specific details remain to be finalized, the recent stimulus measures—including interest rate cuts and initiatives to boost home purchases—have positively impacted investor sentiment, with stocks in Shanghai and Hong Kong experiencing gains.
However, analysts caution that additional fiscal stimulus will be essential to reinvigorate the economy and meet this year’s official growth target of five percent year-on-year. Recent economic data has been underwhelming, with second-quarter growth falling short of expectations at 4.7 percent, while youth unemployment reached 18.8 percent in August, the highest level recorded this year.
Chaoping Zhu, global market strategist at JP Morgan Asset Management, described this week’s stimulus measures as a “shift towards a more aggressive easing stance, given the sustained weakness in domestic growth.” He added, “The sense of urgency may convince investors that more policy support is on its way.”
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