Beijing pledges urban push to stabilise markets
Beijing yesterday vowed to stabilise the market and step up the redevelopment of urban slum areas, which are expected to buoy investor sentiment in the wake of a credit crunch that has jolted capital markets.
"We need to maintain the policy's continuity and stability and stabilise market expectations," Xinhua quoted the State Council, after a meeting chaired by Premier Li Keqiang, as saying.
"This is referring to the recent liquidity crunch," said Gary Liu, an executive deputy director of CEIBS Lujiazui Institute of International Finance.
"The central bank's slow reaction in the past weeks was at least partially responsible for the latest unnecessary market panic. This is a message that the central government is trying to calm the market and investors," Liu said.
The Shanghai share market fell 5.29 per cent on Monday as panic over the interbank liquidity squeeze spread. The market managed to recover most of its losses in Tuesday's trade to close 0.18 per cent lower after the People's Bank of China stepped in to ease liquidity fears. Yesterday, it finished down 0.41 per cent as investors took a wait-and-see attitude.
Liu said the latest message from the State Council could be viewed as a warning to the central bank. But Zhao Xijun, a deputy director of the Finance and Securities Institute at Renmin University, said smaller commercial banks, which are weaker in capital base and liquidity management, should take most responsibility.
By reducing normal investments, the state could concentrate its capital on supporting certain "cutting edge" economic areas, such as the redevelopment of urban slum areas, to encourage follow-up investment by bank credits and other social capital, the State Council said.
It said the state would redevelop 10 million homes in city slums, state-owned mining areas, forest regions and reclamation zones in the next five years. Three million homes will be targeted this year. The report did not specify the investment amount.
"The redevelopment of slum areas will not only improve the poor's living conditions, but also fuel economic growth," Zhao said. "But the central government should be on the alert for local officials turning such redevelopment into property projects."