China is implementing a package of incremental policies to further stabilize the economy, unlock growth potential and boost optimism in growth prospects.
This robust policy package, encompassing fiscal, monetary, real estate, and living standards measures, was carefully crafted through multiple rounds of deliberation by different government bodies.
For instance, the Political Bureau of the CPC Central Committee convened an unprecedented meeting at the end of September to thoroughly analyze the current economic situation and outline further economic work plans. During this pivotal meeting, the top decision-making body resolved to adopt more comprehensive and targeted policy measures to bolster growth trends.
This meeting, typically held in October and December, was advanced to late September, highlighting the Chinese authorities' heightened focus on economic development.
The Chinese economy has posted generally stable performance this year, with New Quality Productive Forces developing and making progress steadily.
Significant efforts have been made to safeguard people's livelihoods and notable progress has been achieved in preventing and mitigating risks in key areas.
Despite new challenges and situations, the fundamentals of the Chinese economy and favourable conditions such as a vast market, strong economic resilience and great potential remain unchanged.
The unexpected timing of the meeting underscores the authorities' swift response and unwavering commitment to addressing new situations, problems and difficulties in a prompt, direct, and targeted manner.
Fiscal and Monetary Policies
The meeting stressed the importance of increasing the counter-cyclical adjustments of fiscal and monetary policies.
It underscored the necessity of issuing and effectively utilizing ultra-long special treasury bonds and local government special-purpose bonds.
The issuance of ultra-long special treasury bonds will substantially enhance people's livelihoods by stimulating consumption, particularly through fostering large-scale equipment upgrades and consumer goods trade-in programs.
In the future, finance authorities are expected to broaden these initiatives to further propel large-scale equipment upgrades and consumer goods trade-ins, as they constitute pivotal areas for optimizing the use of ultra-long special treasury bonds.
With more local government special-purpose bonds, the investment areas in which they are used will be further optimized, with more of them invested in fields such as new energy, new infrastructure and other emerging industries.
At the same time, new energy and new infrastructure projects will play a significant role in promoting high-quality economic development, accelerating the growth of related industries and benefiting people's livelihoods.
Following the meeting, the Chinese central bank announced a 0.5 percentage point reduction in the reserve requirement ratio and hinted at a potential further decrease of 0.25 to 0.5 percentage points within the year, depending on market liquidity.
Additionally, the central bank cut the interest rate of seven-day reverse repos from 1.7 percent to 1.5 percent.
The moves will inject several hundred billion U.S. dollars in liquidity into the market while potentially reducing banks' liability costs to a great extent.
Property Market
The meeting revised the housing purchase restriction policy and lowered interest rates on existing mortgage loans across the country, promoting the establishment of a new model for real estate development.
The new policy, which is conducive to further reducing borrowers' mortgage interest expenses, is expected to benefit 50 million households, or a population of 150 million.
The move is projected to reduce the total interest expenses for all households by approximately 150 billion yuan per year on average, thereby stimulating consumption and investment.
The swift enforcement of this policy immediately invigorated the real estate markets in numerous cities, including metropolises like Beijing and Shenzhen, surpassing all expectations.
During the recently concluded seven-day National Day holiday, Beijing's property market witnessed transactions reaching an unprecedented high for the corresponding period in recent years.
Sales of new homes surged by over 200%, while second-hand home sales increased by more than 150%.
Capital Market
The meeting called for efforts to vigorously guide medium and long-term funds to enter the capital market and clear the obstacles for social security, insurance and wealth management funds to invest in the capital market.
Authorities also pledged their support for mergers, acquisitions, and restructurings of listed companies, along with the implementation of policy measures aimed at safeguarding small and medium-sized investors and progressively enhancing investor returns.
These policy measures have significantly bolstered confidence in the stock market, with markets swiftly responding positively to the announcements.
On the day of the meeting, Chinese stocks closed notably higher, with the benchmark Shanghai Composite Index jumping over 3.6 percent to surpass the 3,000-point mark.
Three days post-meeting, Chinese stocks witnessed one of their most remarkable turnarounds in history, with the Shanghai Composite Index surging 8 percent to exceed 3,300 points, and the Shenzhen Component Index soaring over 10 percent.
The announcement and gradual rollout of these policies have markedly improved investors' expectations and confidence, sparking a surge of funds into the market and reversing the stock market's downturn.
More Measures on Stimulating Consumption
Apart from fiscal and monetary policies aimed at stimulating consumption, the meeting also pledged efforts to increase the incomes of middle and low-income groups and refine the consumption structure.
Measures include prioritizing employment support for key groups such as fresh college graduates, rural migrant workers, individuals just lifted out of poverty and zero-employment households.
This dual focus on income enhancement and consumption stimulation is profoundly sensible as it not only aligns with the logic of macroeconomic policies but conforms to the living logic of residents’ everyday life.
Ahead of the National Day Holiday, the government implemented a financial support measure for specific groups of people, distributing living subsidies to people in extreme poverty, orphans, and other vulnerable groups.
This initiative significantly contributed to the surge in travel during the seven-day holiday, with a record of 765 million domestic trips, marking a year-on-year increase of 5.9 percent and a 10.2 percent rise compared to the same period in 2019.
Domestic tourist spending surpassed 700 billion yuan, approximately 99 billion U.S. dollars, indicating a yearly growth of 6.3 percent and a 7.9 percent increase compared to pre-pandemic levels.
The bustling tourist attractions and diverse consumption scenes across the country epitomized the vitality and resilience of the tourism sector, reflecting enhanced consumer confidence and expectations.
Different apartments have been making concerted efforts to put in place the package of incremental policies from the Political Bureau of the CPC Central Committee while elaborating on the details to the public.
The scale and swift rollout of these policies underscore the Chinese authorities' confidence and resolve to foster a sustained economic recovery.
The gradual implementation of this policy package is not a fleeting effort but a continuation and enhancement of previous initiatives.
China's policies are formulated from a long-term and sustainable perspective, indicating that there are still ample policy tools available.
Given its solid economic fundamentals and robust policy support at this crucial juncture, China is confident of achieving its annual growth target of around 5 percent.
Furthermore, this policy package will contribute to the country's 14th Five-Year Plan, which concludes in 2025.
Simultaneously, the bolstered confidence of the world's second-largest economy and its positive trend of stability and progress will undoubtedly inject momentum into global economic growth.