China’s “big bang fiscal stimulus” turns heads
China's top leaders are pulling out all the stops to revive the country's faltering economy.
According to the Xinhua News Agency, China's Politbruto pledged Thursday a stimulus including a reported 2 trillion yuan ($284 billion) in special sovereign bonds.
Experts say that signals a dramatic shift in Beijing's approach to kickstarting its economy.
“Two trillion yuan well beats expectations,” said Bruce Pang, chief economist for Greater China at Jones Lang LaSalle Inc. “This is a big bang fiscal stimulus that underpins both boosting consumption and defusing risks.”
The Ministry of Finance plans to evenly split the bond funding between stimulating consumption and helping local governments tackle debt problems, Reuters reported, citing anonymous sources.
The move comes as China grapples with a slowdown that saw growth hit its lowest pace in five quarters. The Politburo's meeting resulted in a pledge to "strive to achieve the country's annual economic goals," according to Xinhua News Agency.
The Politburo's readout, released earlier than usual, sparked a rally in Chinese markets.
The CSI 300 Index, a gauge of onshore stocks, surged 4.2%, erasing losses for the year. Meanwhile, a Bloomberg-tracked index of property developers jumped 15.9%.
China is getting serious
The rush to fix things is clear from both when and how the top leaders met. The Politburo usually discusses the economy in its April, July, and December, meetings—not September.
The sheer size of this announcement is also noteworthy. China’s government is known for taking small, careful steps, not going all-in with massive plans to boost the economy.
Larry Hu, head of China economics at Macquarie Group, noted the shift in tone in the readout as well.
"Today's readout only has 1,200 words, compared with 2,000-plus words in previous meetings," he said. "It also cut out the usual jargon such as 'prudent' before monetary policy. All of this suggests a sense of urgency on the part of policymakers."
Officials also called for "forceful" implementation of rate cuts, a stark contrast to the typically vague pronouncements of past meetings.
Plans target property market specifically
China's leaders are also looking to prop up the real estate sector.
"(This) is the first time since the downturn began that the Politburo has explicitly targeted a market rebound," said Julian Evans-Pritchard, head of China economics at Capital Economics.
The government's comprehensive approach extends beyond fiscal measures. The Politburo pledged to strengthen aid for the unemployed and lower-income groups. This follows the previous day’s announcement of one-off cash handouts to residents facing economic hardship.
Many experts think these moves are a good sign for China's economy.
"The frequency and magnitude of policy rollouts have exceeded our expectation," wrote HSBC Holdings economists in a note. "The tide has turned; be prepared for more proactive initiatives."
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