China’s Politburo has announced a comprehensive plan to revitalize the country’s economy, particularly focusing on the struggling housing sector.
In a meeting led by President Xi Jinping, officials pledged to take decisive action to halt the decline in the property market, which saw new-home prices drop at their fastest rate since 2014 in August. The readout from the Politburo emphasized the urgency of fiscal spending and the necessity to stabilize this critical sector.
The government aims to curb the construction of new home projects to alleviate residential oversupply, although such construction has already slowed significantly. While specific details regarding fiscal spending were not disclosed, reports indicate that the Ministry of Finance plans to issue approximately 2 trillion yuan ($284 billion) in special sovereign bonds this year. These funds will be allocated equally between stimulating consumption and assisting local governments with debt management.
Analysts viewed this stimulus package as a significant move. Bruce Pang, chief economist for Greater China at Jones Lang LaSalle Inc., remarked that this level of fiscal stimulus would support both consumption and mitigate economic risks. The initiatives are expected to raise economic growth by about 0.2 percentage points, aiding in the government’s goal to achieve an annual growth rate of around 5%.
Following the Politburo’s announcement, China’s CSI 300 Index, a benchmark for onshore stocks, surged by 4.2%, effectively recovering earlier losses for the year. Additionally, shares of property developers increased significantly, with one gauge rising by 15.9%. Bond yields also reacted, with the yield on China’s 10-year bonds experiencing its largest jump since November 2022.
The statement issued by the Politburo marked a shift in communication style, as it provided clearer guidance on implementing monetary policy measures, including rate cuts. This direct approach reflects an urgent need to address market concerns following recent monetary easing by the central bank.
Economists noted that the focus of this month’s meeting is atypical, as discussions on economic strategies are generally reserved for the Politburo’s meetings in April, July, and December. This deviation indicates rising anxiety about economic performance, particularly as China’s growth slowed to its lowest rate in five quarters.
The Politburo underscored the importance of addressing the challenges facing low- and middle-income groups, as well as enhancing support for those struggling to find employment. Recent government initiatives include one-time cash handouts for residents facing financial hardship.
In terms of housing policy, officials outlined plans to stabilize the real estate market, including expanding financing options for certain projects and adjusting home purchase restrictions. The government has indicated it will reduce existing mortgage rates to ease the burden on homeowners.
While the exact scale of fiscal stimulus remains to be clarified, the overarching goal is to bolster economic momentum and reach the annual growth target of approximately 5%.
