China has revealed plans to provide additional support for its economy without implementing a major spending package. The country’s economic planning agency unveiled measures aimed at boosting economic growth, but refrained from announcing significant spending initiatives. Investors had been hoping for more decisive actions, leading to initial market excitement that later subsided as Shanghai’s benchmark index ended up just 3% higher after an initial 10% gain following a weeklong holiday.
The head of China’s National Development and Reform Commission (NDRC) stated that the government will allocate 100 billion yuan ($14.1 billion) from the 2025 budget upfront, along with another 100 billion yuan for construction projects. However, the overall scale of spending fell below analysts’ expectations of multi-trillion yuan levels. NDRC chairman Zheng Shanjie expressed confidence in China’s ability to meet its economic growth target of around 5% for the year, despite facing challenges in an increasingly complex global environment.
China’s leaders have been grappling with economic recovery post the COVID-19 pandemic, compounded by a slowdown in the property market and subdued consumer spending. UBS chief China economist Tao Wang noted that the market was anticipating a substantial fiscal stimulus, suggesting a more modest package of 1.5 to 2 trillion yuan ($210 billion to $280 billion) was more likely in the short term, with further stimulus projected in 2025.
In September, China introduced a monetary stimulus package with measures such as reduced mortgage rates and reserves required to be kept on deposit with the central bank, aimed at rejuvenating the property sector and stimulating growth. The recent announcements from the NDRC highlighted a focus on bolstering investment, supporting small and medium-sized businesses, and addressing technical issues related to project financing and management.
To address challenges in the housing and stock markets, Zheng mentioned the implementation of comprehensive policy measures to stabilise both sectors. Specific details on measures to boost the capital market were not provided in the announcement. The NDRC’s emphasis on technical aspects and incremental support suggests a cautious approach towards economic stimulus, indicating a strategic effort to navigate the complexities of the current economic landscape.