China vows to hit economic goals but stops short of large stimulus
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The National Day holiday showed tentative signs of a pick-up in consumer sentiment, with domestic trips exceeding 2023’s levels and home sales jumping in major cities.
PHOTO: REUTERS
BEIJING – China said it is confident in reaching its economic targets in 2024 and promised further support for growth, although it held back in unleashing more stimulus in a disappointment to investors looking for more fuel for a world-beating stock rally.
Officials in the National Development and Reform Commission (NDRC), the country’s top economic planning agency, said on Oct 8 they would speed up spending while largely reiterating plans to boost investment and increase direct support for low-income groups and new graduates.
They added that China would continue to issue ultra-long sovereign bonds in 2025 to support major projects and bring forward to 2024 a 100 billion yuan (S$18.4 billion) investment in key strategic areas originally budgeted for 2025.
“We are fully confident in realising our goals for the whole year,” Mr Zheng Shanjie, the NDRC’s chairman, told reporters in the first briefing following a week-long national holiday. He noted that China is facing a more complex environment at home and abroad.
A rally in onshore Chinese stocks on their return from a week-long holiday fizzled quickly as traders questioned Beijing’s resolve to add more stimulus. The benchmark CSI 300 Index was up about 6 per cent after surging almost 11 per cent in the opening minutes. A gauge of Chinese shares listed in Hong Kong tumbled almost 11 per cent before paring some losses.
“Nothing much is new compared to the previous announcements, and the latest commitment to fiscal stimulus looks weaker than market expectations,” said Mr Gary Ng, senior economist at Natixis. “The front-loading of fiscal spending will only help stabilise growth and will not be enough to engineer a sharper rebound.”
The press briefing was closely watched for further steps to lift the economy after Chinese leaders signalled a desire to draw a line under the nation’s growth slump. The barrage of measures raised expectations for additional fiscal stimulus worth trillions of yuan to boost confidence, although scepticism lingers over whether they could sustain growth.
The authorities will introduce “as soon as possible” specific measures to expand the areas allowed to receive funding support from the sales of special local government bonds, NRDC’s Mr Zheng said. Some economists have called on policymakers to permit the bond funds to be used to finance local governments’ purchases of unsold homes from developers to reverse a deepening housing slump.
The agency will also urge local officials to issue the remainder of 2024’s new special bonds – worth about 290 billion yuan – by the end of October, Mr Liu Sushe, a vice-chairman of the NDRC, said at the same briefing. In 2023, China ordered provinces to use up the year’s special local bond quota before adding 1 trillion yuan of sovereign bonds in late October to stimulate the economy.
The NDRC previously earmarked 300 billion yuan raised from selling ultra-long special sovereign bonds in 2024 for an initiative to subsidise purchases of new industrial equipment, home appliances and cars. It also vowed to speed up urbanisation in efforts that would boost demand for property and consumption in cities.
Prior to the briefing, Morgan Stanley analysts said the agency might unveil a 2 trillion yuan fiscal package, including support for local government financing, infrastructure investment and a modest consumption boost. Citigroup expected the fiscal package to amount to 3 trillion yuan, with funds potentially marked also for welfare spending and bank recapitalisation.
The Ministry of Finance, typically responsible for issuing sovereign debt, has yet to make an announcement on any new policy since the Chinese central bank kicked off a series of stimulus package late in September.
China’s leaders aim to achieve around 5 per cent growth in 2024, but economic data in recent months show that would be hard to reach as consumer spending remained sluggish and a property downturn persisted. Rising trade tensions are also threatening new growth drivers such as exports of electric vehicles.
The NDRC is the latest government body to unveil measures to boost an economy on the brink of a deflationary spiral. Just before the Golden Week holiday, the government unleashed a slew of stimulus measures including interest rate cuts, more liquidity to promote bank lending and a pledge of as much as US$340 billion to support the stock market.
The National Day holiday offered tentative signs of a pick-up in consumer sentiment, with preliminary figures showing domestic trips exceeding 2023’s levels and home sales jumping in major cities
