Editorial | Top leadership banks on new directives to fuel China’s growth
- Communist Party Politburo has loosened policy control in some sectors – including the property market and local government debt – without direct stimulus, a sign of its confidence that full-year GDP growth can reach 5 per cent
The Chinese Communist Party Politburo has decided to take it easy on the real estate sector and local government debt. From its latest meeting, there was no bazooka-like stimulus. But it nevertheless signalled a major directional change with significant policy implications.
The top leadership has assessed the country’s post-Covid recovery will be uneven and has been more complex than expected. Instead of a V- or U-shaped recovery, it may be in the shape of W. But the general trend is still upwards. This is borne out by recent data, which show a year-on-year 6.3 per cent growth in the second quarter.
The main message from Beijing is sobering, delivered with a note of caution. Major obstacles remain: weak domestic demand, fragile business confidence, high levels of local debt, a highly uncertain external environment and a slow-growth global economy.
Meanwhile, systematic risks must be managed and mitigated going forward. The key, though, is to maintain a calibrated strategy to regain and maintain the growth momentum.
Capital market control will be loosened, and this is shown by the policy description changing from “maintaining the stability of the capital market operation” to “stimulate the capital market and improve investors’ confidence”.
For the property sector, there is a shift in language as well. The emphasis on suppressing property speculation, a mantra in all the previous Politburo meetings, is missing this time.