Beijing will moderate monetary policy to support growth

Beijing will moderate monetary policy to support growth


Chinese policymakers have stated that they will relax monetary and fiscal policies to support the growth of the world’s second largest economy, but are still committed to achieving the greater goal of controlling debt levels and cooling the Chinese real estate industry.

According to the state-run Xinhua News Agency, the Chinese Communist Party’s annual economic planning year-end meeting, which closed in Beijing on Friday, stated that it would “put stability first”. It added that the Chinese economy is facing a “triple pressure” of shrinking demand, supply shocks and weakening expectations.

The three-day meeting was overshadowed by the developers’ ongoing debt crisis China Evergrande Group As well as the broader real estate market downturn, this has raised concerns that economic growth may slow down sharply next year.

Since the government successfully contained the Covid-19 pandemic, consumption has been sluggish, partly because it persisted “Zero Covid” policy This involves the regular closure of metropolitan areas and regional travel when small-scale outbreaks occur.

In recent months, the Chinese government has also had to deal with coal and electricity shortages, which has caused producer prices to soar.China’s producer price index hits a record high 26-year high In October, an increase of 13.5% over the same month last year. Consumer price inflation rose by only 1.5%.

rating agencies Fitch It was announced on Thursday that Evergrande failed to repay a total of US$82.5 million in bonds within the deadline on Monday, thus triggering a “limited default”. Real estate developers and the Chinese government have remained silent on payment arrears.

On Monday, the People’s Bank of China lowered the level of reserves that banks must maintain, injecting about 120 million yuan into the financial system. This move was widely interpreted as a signal that Beijing hopes to calm market tensions before Evergrande officially defaults.

But the state media and Chinese analysts warned that as President Xi Jinping, we should work harder to achieve “Common prosperity“.

Zhu Ning, deputy dean of the Shanghai Advanced Institute of Finance, pointed out that most of the liquidity released by the People’s Bank of China from Monday’s reduction of reserves will be offset by the expiration of mid-term borrowing facilities of approximately RMB 900 billion this week. “There is no major change in policy,” Zhu said. “This is a slight relaxation, not a major change.”

On Tuesday, the Economic Daily, a newspaper controlled by the State Council, stated that although regulators are determined to protect the stability of the financial system, reserve cuts should not be seen as evidence of “full easing”.

The Political Bureau of the CPC Central Committee, composed of 25 most senior officials, also stated on Monday that it will “maintain social and macroeconomic stability and maintain the main economic indicators within an appropriate range” before next year’s party’s 20th National Congress. Xi Jinping is expected to be in At the meeting, it was ensured that the third party, government and army general secretary was unprecedented.

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