April 24, 2024

China Hints at Stimulus Package to Support Its Declining Economy

  • China’s top leaders said late Monday they would move to support the country’s struggling economy.
  • The Politburo admitted that a stimulus package would be needed to deal with “new difficulties and challenges”.
  • Yuan and Chinese-listed stocks were on the news, with oil extending recent gains.

China’s leaders have promised to introduce new measures to support the country’s weak economy, which is grappling with stagnant growth and rising youth unemployment.

Beijing’s main decision-making body, the Politburo, said late Monday it would launch its stimulus package “with precision and force” to boost demand, according to Xinhua.

“The Chinese economy is facing new difficulties and challenges, mainly arising from insufficient domestic demand, difficulties in the operation of some enterprises, hidden risks and dangers in key areas, as well as a gloomy and complex external environment,” the state news agency also quoted the Politburo, after a meeting chaired by President Xi Jinping.

Data released last week showed China’s GDP growth fell short of forecasters and the unemployment rate among 16- to 24-year-olds rose to 21% in the second quarter of 2023.

The country’s economy has also been hit by a crisis in the property market since the developer Evergrande missed its scheduled debt repayments in the year 2021.

The Politburo was expected to conclude its July meeting later this week, so Monday’s hints of a stimulus package surprised markets.

Hong Kong Hang Seng index jumped over 4% by the closing bell on Tuesday, with the CSI 300 climbing 3% and the Shanghai Composite up 2%.

The IS replay also rose 0.6% to just over 7.14 per dollar, while benchmark crude remained steady after paring the gains of the previous three trading sessions.

Beijing is not yet expected to introduce so-called “big bang” measures to revive growth – but its acknowledgment of the economy’s struggles on Monday is likely to have encouraged investors by setting a tone of fiscal and monetary stimulus, according to analysts.

The Politburo “shared a pro-growth message that explicitly recognizes many of the pain points in the economy — including some in an unusually direct way,” UBS Global Wealth Management CIO Mark Haefele said in a research note seen by Insider.

“Although few concrete details have been disclosed and the language is not associated with stimulus measures such as a bazooka, we think the tone is positive,” he said.

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