As China celebrates the 75th anniversary of the People's Republic, the ruling Communist Party has announced a series of measures aimed at boosting its struggling economy. These include support for the property industry, assistance for the stock market, cash handouts for the poor, and increased government spending. Following these announcements, shares in mainland China and Hong Kong saw significant gains. The People's Bank of China (PBOC) introduced a funding initiative worth 800 billion yuan ($114 billion) to help insurers, brokers, and asset managers buy stocks. PBOC Governor Pan Gongsheng also stated plans to lower borrowing costs and support companies looking to buy back shares. Despite the positive market response, economists warn that these measures may fall short. China's economic growth target of 5% is at risk, with concerns about a potential downturn in the property market, which has been declining for three years. The government's recent stimulus package aims to revitalise real estate through measures like mortgage rate cuts and reduced down payments for second-home buyers. However, scepticism remains regarding their effectiveness. Economist Harry Murphy Cruise emphasised that the underlying issue is a crisis of confidence, not credit access. At a recent Politburo meeting, officials pledged to stabilise the property market and boost consumption, but specifics on government spending were vague. Economists argue that without deeper reforms, structural problems will persist.
On the day of the anniversary, the state-run People's Daily expressed optimism about the future, highlighting President Xi’s vision for "high-quality development" to transition from traditional growth drivers like property to a more balanced economy. Yet, the intertwining of old and new economic models poses challenges that must be addressed for sustainable growth.
