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China unveils fresh stimulus to boost ailing economy
PHOTO: AFP/FILE
AFP, Beijing
China unveiled some of its boldest measures in years on Tuesday aimed at boosting its struggling economy as leaders grapple with a prolonged property sector debt crisis, continued deflationary pressure and high youth unemployment.
The world’s second-largest economy has yet to achieve a highly anticipated post-pandemic recovery and the government has set a goal of five percent growth in 2024 -- an objective analysts say is optimistic given the headwinds it is facing.
On Tuesday, central bank chief Pan Gongsheng told a news conference in Beijing that it would cut a slew of rates in a bid to boost growth, pledging to “promote the expansion of consumption and investment”.
The moves represent “the most significant... stimulus package since the early days of the pandemic”, said Julian Evans-Pritchard, head of China economics at Capital Economics.
But “it may not be enough”, he warned, adding a full economic recovery would “require more substantial fiscal support than the modest pick-up in government spending that’s currently in the pipeline”.
Among the measures unveiled Tuesday was a cut to the reserve requirement ratio (RRR), which dictates the amount of cash banks must hold in reserve.
The move will inject around a trillion yuan ($141.7 billion) in “long-term liquidity” into the financial market, Pan said.
Beijing would also “lower the interest rates of existing mortgage loans”, he added.
The decision would benefit 150 million people across the country, Pan said, and lower “the average annual household interest bill by about 150 billion yuan”.
Minimum down payments for first and second homes would be “unified”, with the latter reduced from 25 to 15 percent, Pan said.
And Beijing will create a “swap programme” allowing firms to acquire liquidity from the central bank, Pan said, a move he said would “significantly enhance” their ability to access funds to buy stocks.
“The initial scale of the swap programme will be set at 500 billion yuan, with possible expansions in the future,” Pan said.
Shares in Hong Kong and Shanghai surged more than four percent Tuesday.
But Heron Lim at Moody’s Analytics said the move was expected given gloomy economic data in recent months suggesting Beijing could miss its 2024 growth target.
“But this is hardly a bazooka stimulus,” he told AFP.
“Far more monetary easing and a stronger government stimulus is also desirable to finish bailing out the real estate market and inject more confidence into the economy,” he said.