China’s central bank has taken steps to bolster its markets in response to economic data indicating a slowdown, particularly the slowest growth in six quarters. As the overall economic landscape appears to be faltering, the government is signaling its commitment to implement stimulus measures aimed at stabilizing the economy and supporting recovery efforts.
Recent reports show that the third-quarter growth rate was 4.6% compared to the previous year, resulting in a cumulative growth of 4.8% for the first three quarters of 2024, which is at the lower end of China’s annual targets. Despite this, some figures from September offer cautious optimism that the economy may be turning a corner. Retail sales, for instance, picked up momentum with a year-over-year increase of 3.2%, attributed to government incentives promoting consumer spending.
The People’s Bank of China (PBOC) has rolled out more strategies, including the introduction of a re-lending facility designed to help listed companies and significant shareholders buy back stocks. This move, along with comments from PBOC Governor Pan Gongsheng, emphasizes the importance of reviving the real estate and equity markets as key aspects of recovery initiatives.
Analysts and economists are expressing increased confidence that China could meet its growth targets of around 5% given this supportive framework. Jacqueline Rong, chief China economist at BNP Paribas, notes that achieving even a modest rebound in the fourth quarter would secure this goal. The recent stock market reaction was indicative of improved investor sentiment, as evidenced by a 3.6% rise in the CSI 300 Index of onshore stocks, stimulated by both central bank actions and signals of governmental support for technological advancements, particularly in the semiconductor industry.
However, challenges remain. While industrial production and investment have shown signs of improvement, the real estate sector continues to struggle, with new home prices facing declines for an extended period. Economic caution is warranted, as indicated by diminishing external demand and lingering deflationary pressures—consumer prices have remained weak while manufacturing prices have shown prolonged downturns.
Economists are pressing for greater fiscal measures to invigorate consumer spending and prevent a potential downward spiral for the economy. Yet, Beijing appears focused on mitigating local debt risks first, with plans to consolidate hidden debts onto local governments’ balance sheets to relieve financial strains.
This multifaceted approach underscores the complex environment in which China is navigating, looking to balance economic growth while managing systemic risks—fiscal prudence remains a cornerstone of policymakers’ agendas. The recent legislative efforts expected in upcoming sessions could pave the way for additional public spending initiatives, providing further hope for recovery as China’s economy seeks to establish a consistent upward trajectory. With the right mix of stimulus and policy support, there is a growing consensus that a gradual economic rebound could indeed be on the horizon.