As China prepares to celebrate its Golden Week holiday and the 75th anniversary of the People’s Republic, the ruling Communist Party is rolling out a series of initiatives aimed at revitalizing its struggling economy. We sat down with experts to explore the implications of these policies.
The recent announcements include assistance for the ailing property sector, support for the stock market, cash handouts for those in need, and increased government spending. Following these measures, shares in mainland China and Hong Kong saw impressive gains. However, some economists express skepticism about whether these actions will effectively address the underlying concerns plaguing the economy.
On September 24, the People’s Bank of China (PBOC) introduced strategies specifically targeted at rejuvenating the beleaguered stock market. Among these new tools is an allocation of 800 billion yuan (approximately $114 billion) available for insurers, brokers, and asset managers to borrow and invest in shares. PBOC Governor Pan Gongsheng also noted that the central bank would support publicly traded companies looking to buy back their shares, alongside plans to lower borrowing costs and encourage banks to increase lending.
Just two days after these PBOC measures were announced, President Xi Jinping hosted a surprise meeting focused on the economy with top leaders, known as the Politburo. Officials committed to enhancing government spending to ensure economic stability.
As the weeklong holiday approached, the Shanghai Composite Index experienced a remarkable surge of over 8%, representing its strongest performance since the 2008 financial crisis. This upturn capped a week in which the index rose by 20%. With mainland markets closed the following day, Hong Kong’s Hang Seng Index also climbed by more than 6%.
“Investors reacted favorably to the announcements,” noted China analyst Bill Bishop. Yet, despite this wave of financial optimism, President Xi faces significant challenges ahead.
As the People’s Republic celebrates its 75th year, it remains in existence longer than the Soviet Union, which collapsed just 74 years post-establishment. Alfred Wu, an associate professor at the Lee Kuan Yew School of Public Policy, points out that evading a similar fate is a consistent concern for Chinese leaders.
The priority for officials is to restore confidence in the economy, particularly as worries grow that hitting the government’s annual growth target of 5% may be more difficult than anticipated. Yuen Yuen Ang, a political economy professor at Johns Hopkins University, underscores that “In China, targets must be met by any means necessary.” The leadership is acutely aware that failing to achieve these objectives in 2024 could deepen the ongoing cycle of low growth and eroding confidence.
