BEIJING: Chinese authorities are under pressure to back up their reassuring rhetoric on the economy with more substantive action.
Equities in China are entering their third consecutive week of losses, the yuan is trading near its eight-month low and turmoil in the country’s credit market is mounting. While Prime Minister Li Qiang on Thursday promised to “spare no time” in implementing targeted stimulus, but he offered none of the details investors asked for.
Meeting with economists, Li said the government will introduce a package of “targeted, comprehensive and well-coordinated” measures to stabilize growth and employment and prevent risks “in a timely manner”. A reading of the event was published by the official Xinhua News Agency.
Li also said the country was “in a critical period of economic recovery and industrial modernization”. Those comments suggested authorities are keen to stick to the course set at an April economic meeting of top leaders, said Bruce Pang, chief economist at Jones Lang Lasalle Inc.
“Policies are still being formed, but major stimulus is unlikely,” Pang said, adding that the government needs to strike a balance between stabilizing growth in the short term and avoiding long-term structural risks .
Shares in China and Hong Kong fell Friday amid general weakness in Asia. A measure of Chinese stocks listed in the financial hub lost as much as 0.7% in early trading, while the onshore CSI 300 Index fell about 0.4%. The offshore yuan rose modestly by 0.1% to 7.2481 per dollar, marking its first weekly gain in three.
Li also indicated that authorities are determined to address the pain felt by private and foreign companies, which in recent years have seen their profits fall and market access narrowed amid regulatory crackdowns and rising tensions between the US and China. A “regular communication mechanism” will be established with the industry, he said, without giving more details.
Expectations that the government will announce economic support have built up in recent weeks as the recovery loses momentum. The real estate market is weak, youth employment is at record highs and household and business confidence remains weak.
The central bank cut its key rate last month for the first time in almost a year, signaling looser monetary policy. But that policy loan rate was cut by only 10 basis points, and additional measures were marginal, such as steps to expand tax incentives for people to buy electric cars. Economists warn that any stimulus measures are likely to be limited.
Investor pessimism, meanwhile, has increased after a private survey signaled weakening momentum in services sector growth, and as geopolitical tensions rose after China announced export controls on key metals.
The Communist Party’s almighty Politburo will have a chance to discuss stimulus measures later this month, when it is expected to convene for a major economic meeting. The authority’s meeting in July is typically the date when economic policies are mapped out for the remainder of the year.
Adblock test (Why?)