The regulators of China promised to intensify efforts to stabilize the real estate and capital markets, in addition to implementing more effective fiscal policies, after a meeting of high-level leaders, in which greater economic stimulus was advocated.
In a conference held on Saturday (14), Dong Jianguo, vice minister of the Ministry of Housing, stated that the Chinese government will promote the recovery of the real estate market through measures such as increasing demand and controlling the supply of land for new ventures.
The China Securities Regulatory Commission announced that it will enhance monitoring of the futures and spot markets, as well as strengthen supervision of margin operations, derivatives and quantitative trading.
The Ministry of Finance reported that it will implement more effective and sustainable fiscal policies next year, with improvements in macroeconomic regulations. The government will also increase the issuance and use of special local government bonds, expanding its investment areas.
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The comments come after a two-day meeting of the Central Economic Work Conference in Beijing, led by President Xi Jinpingwhere officials committed to raising the fiscal deficit target for next year. For the second time in at least a decade, leaders have made a top priority “vigorously boost consumption” and stimulate domestic demand.
The Chinese economy, which has been facing difficulties, has shown a modest recovery in recent weeks with government support, with signs of improvement in consumption and industrial activity. However, overall confidence remains fragile as policies have not been robust enough to lift the country out of deflation.
Data released on Friday (13) shows the challenges faced by policymakers: credit expansion in China unexpectedly slowed in November. Lending to the real economy fell to the lowest level for the month since 2009, offsetting the impact of elevated government bond issuance.
More flexibility is in the plans. According to the newspaper 21st Century Business HeraldChina will cut interest rates and the reserve requirement ratio in a timely manner next year, according to Wang Xin, director of the research office of the People’s Bank of China.
The prospect of further easing is triggering a rush into government bonds. On Friday, the yield on Chinese 10-year bonds fell to a record low of 1.77%, while longer-dated yields also plunged. In contrast, the CSI 300 stock index plunged 2.4%, its worst drop in three weeks.
The Central Bank will also improve the management of exchange rate expectations and protect itself against possible shocks next year. Zou Lan, head of the monetary policy department, said in an interview with state media that the institution will “intensify the management of exchange rate expectations and respond vigorously to external shocks.”
The yuan has been falling sharply since mid-October, and retreated again after a media report suggested authorities were considering allowing its devaluation in response to the threat of a trade war with the United States.
© 2024 Bloomberg L.P.
