China's National Development and Reform Commission (NDRC) has revealed a set of economic measures aimed at stimulating growth, but the announcement has fallen short of investor expectations for more substantial interventions. The measures, disclosed on October 1, 2024, primarily focus on targeted spending and sector-specific support, maintaining China's commitment to its 5% annual growth target.
Zheng Shanjie, the NDRC chairman, outlined plans to frontload 100 billion yuan ($14.1 billion) from the 2025 government budget, along with an additional 100 billion yuan for construction projects. This modest approach reflects China's cautious stance in addressing economic challenges while navigating an increasingly complex global environment.
The announcement's impact on financial markets was muted, with the Shanghai benchmark index initially surging 10% before settling at a 3% gain as investors digested the limited scope of the measures. This reaction underscores the market's anticipation of more aggressive fiscal stimulus to address China's economic slowdown.
China's economy, the world's second-largest by nominal GDP, has faced significant headwinds in recent years. The country's property sector, which accounts for about 30% of its GDP, has experienced a downturn, compounding challenges in consumer spending and global demand. These factors have contributed to the slowing of China's GDP growth from double-digit rates in the early 2000s to single digits in recent years.
The NDRC's approach focuses on boosting investment and spending while supporting small and medium-sized businesses. This strategy aims to level the playing field with large state corporations that have traditionally held advantages in the Chinese economy. The measures also address technical issues such as payment regulations, project management, and bond financing deployment.
In response to the ongoing real estate market challenges, Zheng Shanjie stated, "We will introduce comprehensive policy measures to help stop the decline in the real estate market." This commitment comes as China's property sector faces significant pressures, with implications for the broader economy.
The NDRC also pledged to implement "powerful and effective measures" to boost the capital market, although specific details were not provided. This promise comes as China's stock market, the world's 4th largest by market capitalization, seeks stability and growth.
"The market was likely expecting a significant fiscal stimulus."
Wang suggests that a more reasonable expectation in the near term would be a package of 1.5 to 2 trillion yuan ($210 billion to $280 billion), with an additional 2 to 3 trillion yuan ($280 billion to $420 billion) potentially following in 2025.
These latest measures follow a monetary stimulus package unveiled in September 2024, which included cuts to mortgage rates and reductions in bank reserve requirements. These efforts represent China's most aggressive attempts to date to revitalize the property industry and accelerate economic growth.
As China navigates these economic challenges, it continues to hold significant economic influence globally. The country remains the world's largest exporter of goods since 2009 and boasts the largest foreign exchange reserves, totaling over $3 trillion. Additionally, China leads in renewable energy production and investment, reflecting its commitment to sustainable economic development.
The country's economic landscape is further shaped by its rapidly growing middle class, now comprising about 400 million people, and its position as the world's largest automobile market. These factors, combined with China's extensive high-speed rail network spanning over 40,000 km and its dominant e-commerce sector led by giants like Alibaba and JD.com, underscore the complex and multifaceted nature of the Chinese economy as it seeks to maintain growth and stability in the face of domestic and global challenges.