As China prepares to celebrate 75 years since the founding of the People’s Republic, the ruling Communist Party has introduced several measures to boost its struggling economy.
This comes during the country’s Golden Week holiday. Among the plans are assistance for the troubled property market, support for the stock market, cash payments for low-income individuals, and increased government spending.
Following these announcements, stocks in mainland China and Hong Kong surged, with the Shanghai Composite Index rising over 8% in one day—its best performance since the 2008 financial crisis. However, experts caution that these measures might not solve the country’s deeper economic issues.
On September 24, the People’s Bank of China (PBOC) announced initiatives to help stabilize the stock market, including a fund of 800 billion yuan (about $114 billion) for insurers and brokers to buy shares.
PBOC Governor Pan Gongsheng also mentioned plans to lower borrowing costs and increase lending. Shortly after, President Xi Jinping led a surprise meeting of top leaders, promising to boost government spending further.
While investors responded positively to the news, Xi Jinping faces more significant challenges. As the People’s Republic reaches its 75th anniversary, there’s a growing concern among officials about maintaining confidence in the economy, especially since there are worries China may not meet its annual growth target of 5%.
A major problem for China’s economy has been the decline in the property market, which started three years ago. The new stimulus package aims to address this by encouraging more bank lending and lowering mortgage rates. However, some experts doubt that these measures will significantly impact the housing market【BBC】.
Harry Murphy Cruise, an economist at Moody’s Analytics, emphasized that the issue lies more in confidence than in access to credit; businesses and families are hesitant to borrow money, regardless of the low interest rates.
At the Politburo meeting, leaders committed to more than just cutting interest rates and talked about using government funds to stimulate growth, but they did not provide detailed plans.
Economists believe that addressing long-standing issues in the real estate market is crucial to improving the overall economy. With falling house prices undermining consumer confidence, ensuring that unfinished homes are completed is vital.
Also, they suggest that financial support for households should focus on long-term improvements in pensions and social security, rather than just one-time payments.
On the day of the 75th anniversary, the People’s Daily, a state-run newspaper, published an optimistic article acknowledging the challenges ahead but emphasizing that the future holds promise. It pointed to President Xi’s ideas about “high-quality development” and “new productive forces” as essential for building a more balanced economy.
The challenge, according to experts, is that the old economy, based on property and infrastructure, is closely linked to the emerging new economy.
A rapid decline in the old economy could hinder the growth of new sectors, highlighting the complexities of the situation.
Credit : BBC
https://www.bbc.com/news/articles/c3dvrxg8mllo