Economy: China does not unveil new stimulus measures

The Chinese authorities assured Tuesday that they were “fully confident” of achieving the GDP growth target in 2024, but did not unveil new measures to revive the economy, disappointing the markets.

“We are fully confident of achieving economic and societal development goals this year,” said Zheng Shanjie, chairman of the National Development and Reform Commission (NDRC), at a press conference 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.

5% target

But it ultimately disappointed, with senior Commission officials announcing no new measures despite the difficulties facing the Chinese 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%.

But these gains were partially erased, due to the lack of a major announcement during the press conference. At midday, the Shanghai Stock Exchange gained 4.8% and that of Shenzhen 7.7%. The Hong Kong Stock Exchange lost more than 5%.

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, the package of measures caused the stock markets of Hong Kong and mainland China to soar by more than 20%.

Most of the measures announced so far 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 in 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 packages of progressive measures, market expectations have recently improved significantly,” he said.

Analysts were hoping for new measures, particularly fiscal support, such as 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, and thus remove the main obstacles to growth.

“Unless China introduces structural reforms to revive consumption – from unemployment benefits to retirement pensions – I don’t think we will see a major change,” predicted, before Tuesday’s conference, Alicia Garcia Herrero, economist in charge of the Asia-Pacific region at Natixis.

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