China Politburo Unveils Bold Economic Measures: Focus on Fiscal Spending, Real Estate Stabilization, and Income Growth

On September 26, China’s Politburo held a meeting to discuss the country’s current economic situation and plan future economic strategies, according to state media reports. The Politburo highlighted several key economic measures aimed at stabilizing and stimulating growth.

Key Takeaways from the Politburo Meeting:

1. Economic Stability and Adjustments

The Politburo emphasized the need for counter-cyclical adjustments in fiscal and monetary policies to address economic challenges. They reiterated that the fundamentals of China’s economy remain strong, with a broad market, robust resilience, and significant growth potential.

2. Monetary Policy and Fiscal Spending

The government plans to lower the reserve requirement ratio (RRR) and implement more aggressive interest rate cuts to stimulate economic activity. In addition, they assured that necessary fiscal spending will be maintained to support economic growth.

3. Boosting Income and Consumption

A key focus will be increasing the income of low- and middle-income groups, which is seen as vital to improving the consumption structure and boosting overall demand.

4. Real Estate Market Stabilization

In light of recent property market challenges, the Politburo emphasized the importance of stabilizing the real estate sector. They plan to increase loans for “white list” projects and strictly control the construction of new commercial homes. Efforts will also be made to halt property market declines.

5. Investment and Reform

The Politburo pledged to enhance efforts to attract and stabilize investment, particularly in the manufacturing sector. They will push forward reforms that facilitate foreign investment access and support mid- to long-term capital inflows into the stock market.

6. Support for Key Sectors and Groups

Policies will be introduced to support key industries like old-age care and childcare, and to improve childbirth support systems. Employment initiatives will focus on important demographic groups, such as fresh college graduates and rural migrant workers.

7. Small and Medium-Sized Investors

New policies will be studied and introduced to protect small and medium-sized investors, ensuring their participation in the market is safeguarded.

8. Private Sector Growth

A new law promoting the private economy will be introduced to create a positive environment for the non-public sector, further supporting economic diversification and growth.

9. Essential Supplies and Price Stability

The Politburo underscored the importance of ensuring stable prices and a reliable supply of essential materials like food, water, electricity, and heating.

Market Reaction:

The financial markets responded positively to the meeting’s outcomes. The yuan strengthened in both offshore and onshore markets, with the offshore yuan (CNH) rising 0.37% to 7.0050 per dollar, while the onshore yuan (CNY) increased by 0.23% to 7.0125 per dollar.

China’s stock markets also saw gains, with the blue-chip CSI300 index climbing more than 2% and the Shanghai Composite Index up by 0.8%. The CSI Mainland Real Estate Index surged over 5%, China’s CSI 300 Real Estate Index has surged by more than 8%, while Hong Kong’s Hang Seng Index rose by 2.6%.

The Chinese government’s commitment to economic stability, real estate market reforms, and increased support for investment and employment is likely to be a driving force behind future economic recovery efforts.

This comprehensive economic strategy sets the tone for achieving China’s full-year economic and social development goals while addressing current challenges in the global and domestic economic landscape.

Update

China is set to issue $284 billion in sovereign debt as part of a new fiscal stimulus package, according to sources. Some of the support measures could be announced as early as this week. The package is reportedly divided into two parts: one aimed at boosting consumption, and the other intended to assist local governments in managing debt issues. Additionally, the funds will provide a monthly allowance of approximately 800 yuan per child to households with two or more children, excluding the first child, sources say. The report was initially cited by Reuters.