In the midst of a difficult post-COVID recovery, China’s top leaders committed on Monday to increase policy support for the economy, focusing on increasing domestic demand and indicating additional stimulus measures.

The second-largest economy in the world expanded at a sluggish rate in the second quarter because to weaker domestic and international demand, putting pressure on policymakers to provide additional stimulus to support the post-COVID recovery.

According to the Politburo, the top decision-making body of the ruling Communist Party, which was quoted by the state news agency Xinhua, China would accelerate economic policy reforms, focusing on increasing domestic demand, strengthening confidence, and reducing risks.

“Currently, China’s economy is facing new difficulties and challenges, which mainly arise from insufficient domestic demand, difficulties in the operation of some enterprises, risks and hidden dangers in key areas, as well as a grim and complex external environment,” Xinhua quoted the Politburo as saying, after a meeting chaired by President Xi Jinping.

As long as the government adheres to a responsible monetary policy and proactive fiscal policy, China will undertake its macro adjustments “in a precise and forceful manner” and intensify countercyclical adjustments, the Politburo was cited as saying.

President Xi was quoted by Xinhua as saying that China would work to attain its yearly development goals during a separate meeting.

While analysts believe China will achieve its low 5% growth objective for 2023, there is a chance the yearly target will be missed for the second consecutive year.

According to the majority of analysts, officials’ concerns about rising debt risks prevent them from implementing any substantial intervention.

According to Capital Economics analysts, the meeting’s conclusion indicated that more policy support would be implemented in the upcoming months.

“But the absence of any major announcements of policy specifics does suggest a lack of urgency or that policymakers are struggling to come up with suitable measures to shore up growth,” they said in a note.

In order to navigate the difficulties facing the second-largest economy in the world, a senior central bank official stated earlier this month that the bank will deploy policy instruments including the reserve requirement ratio (RRR).

Even though there were indications that the economic recovery was stalling last week, the central bank maintained its lending targets.

According to Xinhua, China would actively increase domestic demand, increase resident salaries to enable consumption to fuel economic growth, and quicken the issuing of local special bonds to encourage investment.

According to Xinhua, the government would encourage travel and increase demand for household goods, automobiles, and electronics.

In response to “significant changes” in the supply and demand dynamics of the real estate market, China stated it would promptly alter and optimise its property regulations.

“This is an interesting signal as the property sector downturn is arguably the key challenge the economy faces now,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.

“It seems the government has recognised the importance of policy change in this sector to stabilise the economy.”

Analysts anticipate China will remove certain city-specific limitations on property purchases.

China will successfully address local government debt concerns and develop a range of solutions to address local debt difficulties in the face of the growing burden of repaying local debt, according to Xinhua.

According to Xinhua, China would stabilise trade and foreign investment while also enhancing the development environment for private businesses.

China also announced rules for enhancing the private sector last week and pledged to make it “bigger, better, and stronger.”

(Adapted from Nasdaq.com)

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