By Kevin Yao, Joe Cash and Ellen Zhang
BEIJING- China said on Tuesday it was ‘fully confident’ of achieving its full-year growth target but refrained from introducing stronger fiscal steps, disappointing investors who had banked on more support from policymakers to get the economy back on track.
China shares rallied in early trade to two-year highs after the long National Day holiday but quickly lost steam after the state planner did not provide details to sustain market optimism. Hong Kong shares slumped as investors also walked back some of the stimulus excitement.
Chairman of the National Development and Reform Commission Zheng Shanjie told a press conference the government planned to issue 200 billion yuan ($28.3 billion) in advance budget spending and investment projects from next year.
The country will also quicken fiscal spending and “all sides should keep making efforts more forcefully” to strengthen macroeconomic policies, he added.
“The international market is volatile, global trade protectionism has intensified, and uncertain and unstable factors have increased. These will have an adverse impact on my country through trade, investment, finance and other channels,” Zheng said.
Investors and economists say more policy support is needed on the fiscal side to sustain the market’s optimism, likely to be issued by the finance ministry.
“So far, the NDRC press conference appears to run short on details with regards to stimulus measures. Hopes were raised but the delivery was disappointing,” said Christopher Wong, currency strategist at OCBC.
“Post-opening rally in Chinese equities has fizzled out and the lack of follow-through is a setback to sentiments.”
In an effort to reverse the economic downturn, China unveiled before the week-long Golden Week holiday its most aggressive monetary stimulus package since the COVID-19 pandemic, coupled with extensive property market support.
Analysts said it would take time to restore consumer and business confidence and get the economy back on more solid footing. A housing market recovery, in particular, could be a long slog.
“We anticipate that the government will arrange 1-3 trillion yuan of additional fiscal support this year and next to boost the real economy, recapitalize banks, and stabilize the property market,” said Yue Su, principal China economist at the Economist Intelligence Unit (EIU).
“This, along with investments from special long-term bonds planned for next year, is expected to primarily impact 2025’s economic growth.”
EIU retains its economic forecast of 4.7 percent growth for this year and 4.8 percent growth in 2025, Su said. – Reuters
