China’s National Development and Reform Commission (NDRC) outlined new measures on Tuesday aimed at stimulating the country's economy, but refrained from announcing any large-scale spending initiatives. Investors, who had been anticipating more aggressive moves, were left disappointed by the modest scope of the plans, leading to a market dip after an initial surge. Shanghai’s stock market, which saw a 10% jump after reopening following a weeklong holiday, settled at a 3% gain by the end of the day.
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Zheng Shanjie, chairman of the NDRC, announced that the government would frontload 100 billion yuan ($14.1 billion) from the 2025 budget, adding another 100 billion yuan for infrastructure projects. However, the total spending falls short of the multi-trillion-yuan stimulus packages that some analysts had predicted. Zheng maintained that China is still on track to achieve its full-year economic growth target of around 5%, but acknowledged that the country is facing significant challenges, including a more complex global environment.
China’s recovery from the COVID-19 pandemic has been hindered by a sluggish property market, weakened consumer spending, and slower global demand. Despite these obstacles, Zheng expressed confidence that the nation would reach its economic goals, but he also noted that the government must address these ongoing issues.
The measures outlined focused on boosting investment, supporting small and medium-sized enterprises (SMEs), and managing construction projects through bond financing. However, the announcements lacked specifics on how these initiatives would be implemented or their potential impact.
One of the major concerns is the real estate market, which has experienced a significant decline in both sales and prices. Zheng promised that comprehensive policy measures would be introduced to stabilize the sector, but details were not provided.
China’s stock market has also been volatile, and Zheng stated that the government would introduce strong measures to boost investor confidence and stabilize the markets, though again, no specific plans were shared.
Economists had been hoping for more ambitious fiscal stimulus. Some, like UBS chief economist Tao Wang, suggested that a stimulus package in the range of 1.5 to 2 trillion yuan ($210 billion to $280 billion) could be expected in the near future, with a further 2 to 3 trillion yuan ($280 billion to $420 billion) likely in 2025.
In recent months, China has rolled out a series of monetary policies aimed at stabilizing the economy. September saw cuts to mortgage rates and lower reserve requirements for banks in an effort to boost lending and revive the property market, a critical driver of economic growth.
While the measures announced were more targeted, focusing on investment and key sectors like real estate, the absence of a large-scale fiscal stimulus package leaves open questions about the government’s ability to spur a stronger economic recovery. The real impact of these policies will depend on how they are implemented and whether they can effectively tackle the challenges facing the Chinese economy.
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