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Vice-Premier Liu He has promised “policies favourable to markets” and the economy. Photo: Bloomberg

Chinese Vice-Premier Liu He vows support for economic growth, capital markets amid mounting headwinds

  • China will stabilise markets and take ‘substantial measures’ to shore up first-quarter economic growth, vice-premier says
  • Stocks in China and Hong Kong rallied on Wednesday following Liu’s comments, with the CSI 300 Index jumping more than 4 per cent
China will roll out support measures to bolster its capital markets and steady economic growth following a massive stock sell-off over the past two weeks, driven by concern over coronavirus outbreaks, regulatory action and Russia’s invasion of Ukraine.

The government will “actively release policies favourable to markets” and make sure any regulation that could have “a significant impact on capital markets” is coordinated with financial management departments in advance, the Xinhua news agency quoted Vice-Premier Liu He as saying at a meeting of the Financial Stability and Development Committee under the State Council.

Stocks in China and Hong Kong rallied on Wednesday following Liu’s comments. China’s CSI 300 Index jumped more than 4 per cent, while the Hang Seng Index closed 9.09 per cent up. The Hang Seng Tech Index soared more than 22 per cent.

Liu encouraged long-term institutional investors to increase their shareholdings, while promising to closely communicate with the Hong Kong regulator to maintain stability in the city’s financial market.

01:25

China aims for modest 5.5% GDP growth in 2022, citing economic pressures

China aims for modest 5.5% GDP growth in 2022, citing economic pressures

The government will also take “substantial measures” to shore up the first-quarter economic growth, Liu added.

A new wave of coronavirus infections has stirred doubt among some observers that the country can reach its ambitious economic growth target of “around 5.5 per cent” this year.
The weak sentiment, driven by factors such as the Russia-Ukraine war and tensions between Beijing and Washington, has led to massive capital flight and big drops in the benchmark CSI 300 index of large Shanghai- and Shenzhen-listed shares.

Ding Shuang, chief economist for Greater China and North Asia at Standard Chartered, said the meeting was a “direct response” to the sharp fall in Chinese markets and growing concerns about government policies.

The Financial Stability and Development Committee said it was cooperating with US regulators over Chinese companies listed on American indexes, and that the government would “continue to support all kinds of enterprises to float overseas”.

China will also strengthen “market-oriented” rules for the platform economy. Efforts to “rectify” big platform companies will be done with transparent and predictable regulation, “as soon as possible”, the statement said.

The committee added it would “forcefully and effectively” implement plans to solve financial risks associated with property developers, who saw sales continue to slide in January and February.

Separately on Wednesday, the Ministry of Finance said it would not expand the property tax trial programme this year. It said conditions were not ripe to pilot the scheme in more cities this year after initial research, according to Xinhua.
Beijing launched a major crackdown on its tech sector last year, reining in years of freewheeling growth with pledges to tackle monopolistic behaviour and to better protect consumer data.
It also tightened regulation on industries ranging from education to property, roiling financial markets and dimming the outlook for growth in the world’s second-largest economy.

JD.com, Alibaba lead record surge in Hong Kong as Beijing pledges support

Ding said more supportive monetary policies were likely to come following the meeting.

“We have always expected a reserve-requirement-ratio cut this month and an interest-rate cut next month, so after this meeting we have more conviction – the odds are greater,” he said.

Current regulations did not give the market a clear picture of what Beijing’s “endgame” was, Ding said.

“The regulation is unlikely to reverse. They will still do what they want, but they will give others a more clear [message] about what they want to achieve before stopping further tightening,” he said.

Ding added that market confidence was too weak, and that there were worries about the future of the capital market. “Without an official response, this negative expectation would continue to self-reinforce – so it is needed to break this vicious circle,” he said.

The market fluctuations are not good for anyone
Xu Hongcai

He also noted that “another concern of the market is whether the Russia-Ukraine conflict will indirectly affect China, or whether the US will impose secondary sanctions on China”.

Xu Hongcai, deputy director of the economic policy commission under the China Association of Policy Science, said the committee had tried to send a signal of cooperation between China and the US in finance.

“The market fluctuations are not good for anyone,” he said.

He argued that the Russia-Ukraine crisis, the outlook of Federal Reserve’s rate hike and resurgent Covid-19 outbreaks had all led to the recent market turbulence.

02:54

China’s delicate position on Russia-Ukraine crisis and its opposition to Western sanctions

China’s delicate position on Russia-Ukraine crisis and its opposition to Western sanctions
Xu said the recently released government work report had also called for communication with market entities before issuing policies.

“This is mainly about communicating with private entrepreneurs, soliciting their opinions, the process of communication is conducive to stabilising expectations and correcting policy deviations at the same time,” he said.

“It is about forming a benign interaction between cats and mice, which is very important.

“If the market entities understand your policy, it will actually be good for the implementation of the policy; drawing on the opinions of all parties will help the policy to be approachable and realistic.”


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