China pledges steps to shore up flagging economy
Summary
Chinese leaders said they would take more aggressive steps to boost consumer spending and head off a worsening set of economic challenges.
HONG KONG : Chinese leaders said they would take more aggressive steps to boost consumer spending and head off a worsening set of economic challenges, signaling rising concern about flagging momentum in the world’s second-largest economy.
The Communist Party’s top policymaking body, the 24-member Politburo, pledged more measures to boost household income and reduce funding costs for companies, though the report from the state-run Xinhua News Agency offered few specifics on what it is planning.
The Politburo meets roughly four times a year to discuss economic policy and Tuesday’s meeting, as expected, offered shorter-term measures to complement the longer-term economic and other priorities laid out in last week’s twice-a-decade Third Plenum.
As the recovery has shown signs of slowing this year, China’s central bank has already jumped into the fray, delivering a string of surprise rate cuts last week that amount to the most substantial easing of monetary policy so far this year.
Tuesday’s meeting, chaired by party leader Xi Jinping, didn’t point to any theoretical shifts to their approach in tackling some of China’s thorniest issues, most notably a property sector that remains in crisis as well as hidden debts racked up by Chinese local governments that are also holding back growth.
The Politburo’s assessment of China’s economy is “grimmer" in tone when compared with that of senior officials two weeks ago when they released second-quarter economic growth figures, said Bruce Pang, a China economist at Jones Lang LaSalle. The Politburo’s downbeat tone indicates that more policy support and stimulus could be in the offing.
The Chinese economy slowed sharply in the second quarter of the year, with gross domestic product expanding just 4.7% compared with a year earlier. Growth also fell short of economists’ expectations.
GDP growth in the second quarter showed that while manufacturing investment and exports powered the growth, weak consumer spending and the still-sluggish property sector were significant drags.
At Tuesday’s Politburo meeting, Communist Party leaders stressed the importance of expanding domestic demand with a focus on boosting consumption, Xinhua said. Leaders also pledged to support consumption in industries including culture and tourism, elderly care and housekeeping, without offering further details.
They also signaled more regulatory efforts to address inefficient production and excessive competition in industries as China grapples with overcapacity issues that have sparked trade tensions abroad.
Investors appeared largely unimpressed with the meeting. The CSI 300 benchmark index closed down 0.6% while Hong Kong’s benchmark index retreated 1.5% by midafternoon.
Xiao Xiao and Grace Zhu contributed to this article.
Write to Rebecca Feng at rebecca.feng@wsj.com
