China’s leaders have pledged to spend as “necessary” to meet the country’s economic growth target of about 5 percent, and are considering injecting up to a trillion yuan (US$142.39 billion) into its biggest state banks, Reuters and Bloomberg have reported.
These measures align with the major stimulus package unveiled on Tuesday, which cut both the mortgage rate for existing housing and the reserve requirement ratio (the amount of cash commercial banks need to hold as reserves) by half a percentage point.
The latest spending advice, made at the Politburo’s monthly meeting on Thursday, urged the government to support household consumption and stabilise the beleaguered real estate market. Officials should “respond to people’s concerns, adjust home purchase restriction policies, lower existing mortgage rates and improve land, fiscal, tax and financial policies as soon as possible to push forward the new model of property development,” the Politburo said.
[See more: Beijing announces new stimulus measures to boost the economy]
Chinese and Hong Kong real estate shares, the stock market and Chinese bond yields rose in response to the news.
Bruce Pang, chief economist China at Jones Lang LaSalle, said the Politburo’s stimulus endorsement represented “a strategic shift” in the right direction. “A pick-up in government spending will probably be sufficient to drive a turnaround in business confidence, market sentiment and economic activities, helping China to catch up with potential trend growth,” he told Reuters.
Meanwhile, through pumping up to a trillion yuan into its biggest state banks (mainly through new special sovereign bonds), Beijing hopes to boost their capacity to support the nation’s economy.
