Business

China unveils new $44 billion in aid to boost struggling economy

Beijing has announced tens of billions of dollars worth of stimulus measures in an attempt to bolster confidence as China’s economy is battered by a downturn in the property sector and zero-Covid policies. of President Xi Jinping.

The State Council, China’s cabinet, added Rmb300 billion ($44 billion) in credit support by its policy banks, state-controlled institutions used by Beijing to promote economic growth, according to an official announcement late Wednesday.

“This will effectively expand investment, boost consumption and help keep economic activities running smoothly,” said Chinese Premier Li Keqiang, who is jointly responsible for the second-largest economy. the world said. economy.

The latest efforts show Beijing is trying to walk away when it comes to using the central government stimulus and loose monetary policy to prevent slowing growth while avoiding adding to the country’s debt.

But the measures, seen by analysts as incremental rather than transformative, also reaffirm Xi’s directive as a priority against the health risks posed by the pandemic to the economy. .

The State Council statement noted that while “the foundation of the economic recovery is not solid”, China will avoid “requiring large stimulus measures or damaging long-term interests”. .

However, Li called on China’s local governments to pool their use of more than Rmb500 billion in funds already available through increased bond issuance. Beijing also promised Rmb200 billion in bond issuance by state-owned power corporations.

The State Council will send task forces to monitor local governments and said detailed implementation plans should be prepared by October.

“We should expedite the delivery of policy measures. The central government will create favorable conditions and local authorities [will be] tasked with implementing the policy,” said Li.

Many analysts still interested about the profound structural risks posed by the slowdown in China’s property sector, which accounts for nearly a third of gross domestic product. Fears of a slew of cash-strapped property developers, including Evergrande, which has more than $300 billion in debt, has hampered the economy’s recovery from the initial shock of the pandemic.

Mr. Xi’s refusal to move away from his controversial non-Covid policies, regarding the establishment Tight lock and batch test wherever the virus outbreak is found, has taken away consumer confidence and hampered more efficient service sectors.

Some investors and economists have called for a stronger stimulus as well as longer-term structural reforms to address China’s slowing growth trajectory. Beijing targets its lowest growth in three decades, at around 5.5 percent this year.

Goldman Sachs did not change its forecast for “sluggish” GDP growth this year to 3% after announcing the latest measures.

The stimulus measure “could help offset the sharp decline in government revenue and support infrastructure investment growth to some extent in the coming months,” the bank’s analysts said. “.

However, they added, “with a very weak real estate sector and impediments to activity growth from local Covid outbreaks and related control measures, excluding the With major policy easing, we think overall growth will remain sluggish for the rest of the year.”

“The reading uses the phrase ‘no easing measures and no excessive borrowing in the future’, suggesting that any stimulus will likely be moderate relative to the magnitude of the economic slowdown. “

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