The Chinese authorities assured Tuesday that they were “fully confident” in achieving the GDP growth target in 2024, but without unveiling new measures to revive the economy, disappointing market expectations.
“We are fully confident (in) achieving the economic and societal development goals this year,” Zheng Shanjie, chairman of the National Development and Reform Commission (NDRC), said at a conference in press in Beijing.
“We also have full confidence in the pursuit of stable, healthy and sustainable development,” he added.
This conference was eagerly awaited, with investors hoping for new measures to revive the economy, ten days after a first salvo which caused the stock markets to jump.
But it ultimately disappointed, with Chinese officials announcing no new measures despite the difficulties facing the economy, mainly a real estate crisis and sluggish household consumption.
The world’s second largest economy has set itself a target of growth of around 5% this year, a figure considered optimistic by many analysts because the country is struggling to restart since the end of Covid.
On Tuesday, the Shanghai and Shenzhen stock exchanges opened up more than 10%, before running out of steam due to lack of announcement at the press conference. At the close, the Shanghai Stock Exchange still gained 4.59% and that of Shenzhen 8.89%. That of Hong Kong, on the other hand, lost 9.41%
Real estate revival
After sparse announcements in recent months with no apparent effect, at the end of September the Chinese authorities unveiled measures on a scale unprecedented in years, including rate reductions and more accessible property loans.
Described as a “bazooka recovery” by an analyst, these measures caused the stock markets of Hong Kong and mainland China to soar by more than 20%.
Most of the measures already announced have targeted the real estate sector, long an engine of Chinese growth but now in deep crisis, like the developers Country Garden and Evergrande, heavily in debt and on the verge of bankruptcy.
The Central Bank notably reduced the one-year interest rate with financial institutions, reduced the contribution required for a property loan and also lowered existing mortgage rates.
Several Chinese metropolises have also announced the lifting of certain local restrictions perceived as a barrier to the purchase of property, notably Beijing, Shanghai, Canton and Shenzhen.
“Structural reforms”
“Overall, looking at the current development and development forecasts, the fundamentals of our country’s economic development have not changed,” Zheng Shanjie assured Tuesday.
“With the continued implementation of various policies, especially progressive measures packages, market expectations have recently improved significantly,” he said.
Instead of the expected bazooka, “it was more of a plastic gun”, underlined Stephen Innes, analyst at SPI Asset Management, judging that “Beijing’s reluctance to launch a larger package (of measures) raises serious doubts on the sustainability of the rise” of the markets.
Analysts were hoping in particular for a large-scale bond issue or policies to support household consumption.
But they also warn that deeper reforms of the Chinese economic system will be needed to reduce debt in the real estate sector and revive consumption, the main obstacles to growth.
“Unless China introduces structural reforms to revive consumption (…) I don’t think we will see a major change,” predicted, before the conference, Alicia Garcia Herrero, chief economist for the Asia region. -Pacific at Natixis.
For analyst Shehzad Qazi, from the China Beige Book firm, in the short term growth will actually be achieved: “the Chinese economy is not in crisis and (Beijing) does not need to announce a vast program of spending” for 2024 in order to achieve its GDP target.
But in the long term, more will undoubtedly have to be done, he warns, with the key being “the resolution of the structural problems which are slowing down the transition of the economy towards a model driven by consumption”.
Trade tensions weigh heavily. And they went up a notch on Tuesday with the announcement by Beijing of its desire to require importers of European cognac from Friday to post a deposit with Chinese customs.
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