Politburo pledges new tools, policies to bolster growth
Leaders to push for timely tax cuts and other support measures to stabilise Covid-hit economy
Beijing has shown confidence that it can realise its seemingly conflicting goals of achieving an growth rate of “around 5.5 per cent” for the year while also maintaining a zero-Covid policy that continues to have an outsized impact on the economy.
The top leadership vowed yesterday to speed up the implementation of existing taxcut and supportive policies, as well as the use of new monetary policy tools and effective investment, while also refining regulatory policies, according to a statement following a quarterly economic meeting of the 25-member Politburo, the centre of power within the Communist Party headed by President Xi Jinping.
Specifically, the widely watched Politburo meeting said the leadership would actively respond to the concerns and appeals of foreign investors, who have been greatly affected by fresh waves of coronavirus outbreaks that began last month.
The meeting also showed signs that leaders might be keen on loosening their tight controls on internet firms and property developers.
Despite the complicated situation involving “changes unseen for a century” and the unprecedented coronavirus pandemic, the Party Central Committee made its targets clear.
“The pandemic has to be contained, the economy should be stabilised, and the development should ensure security,” the statement following the meeting said.
“We must insist on the policies of preventing both inbound infections and a domestic rebound of cases, and [adhere to] dynamic zero-Covid, doing our best to protect people’s lives and minimise its impact on the national economy and society.
“Pandemic controls and economic and social development must be efficiently coordinated according to the new transmission characteristics of the [Omicron coronavirus] variant,” it added.
The statement, which was released earlier in the day than is typical following such meetings, boosted investors’ sentiment across the board ahead of the fiveday Labour Day holiday.
China’s A-share market jumped in the afternoon session, with the CSI300 index, which tracks the largest listed companies in Shanghai and Shenzhen, closing up 2.4 per cent.
Hong Kong’s stock market also rallied, with Alibaba and Tencent – two internet platforms that have been subjected to government probes – rising 15.7 per cent and 11.1 per cent, respectively. Alibaba owns the Post.
The yuan also saw a sharp appreciation following the Politburo statement. The onshore yuan closed at 6.5866 against the US dollar yesterday, strengthening from its close of 6.6248 on Thursday. A lower yuan exchange rate figure means it takes fewer yuan to purchase one US dollar, indicating a stronger Chinese currency.
In the offshore market, the yuan last traded at 6.6291 against the US dollar, after weakening to 6.6931 in the morning session.
Beijing’s 5.5 per cent growth target is being increasingly questioned as rigid lockdowns in Shanghai and other large cities from March have already taken a toll on retail sales, production capability and logistics.
Externally, the war in Ukraine has driven up global commodities prices, forcing the world’s largest buyers of iron ore, crude oil, soybeans and many other products to pay more, while tensions with Washington and Brussels blur the outlook for Chinese exports.
Additionally, some foreign investors have trimmed their holdings of Chinese stocks and bonds in anticipation of more interest rate increases by the US Federal Reserve.
“The pandemic and Ukraine crisis have led to increased risks and challenges. Our economic development is becoming more complicated, severe and uncertain. We are facing new challenges in stabilising growth, employment and prices,” the statement said.
Several international organisations have downgraded their annual GDP estimates for China to a growth range between 4 and 4.5 per cent, including a forecast of 4.4 per cent by the International Monetary Fund last week.
China’s leaders called for enhancing policy support to stabilise the economy and achieve Beijing’s full-year growth target.
“While accelerating the implementation of previously announced policies, including tax and fee cuts and rebates, we must make good use of a variety of monetary policies and look into additional tools,” the Politburo said, while also stressing the need to “expand domestic demand”.
We must make good use of a variety of monetary policies and look into additional tools
POLITBURO STATEMENT
Just two days before the Politburo meeting, the Central Financial and Economic Affairs Commission unveiled a new infrastructure plan that prioritised national security, with a call to front-load construction projects and financing support.
And at yesterday’s meeting, the authorities also expressed support for the refining of local property policies, particularly for first-time homebuyers.
The statement also mentioned the importance of optimising presales funding regulations – a sign that financing curbs may be loosened – while also calling for the pace of property development to be accelerated.
Still, some analysts questioned what sort of impact the policy adjustments might have.
“We remain deeply concerned about growth, as we believe that Omicron and the ZCS [zero-Covid strategy] are the dominant challenges to growth stability,” said Lu Ting, Nomura’s chief China economist. “Those easing measures, even on a big scale, may not achieve their intended impact due to lockdowns and logistics disruptions.”
Ding Shuang, chief Greater China economist at Standard Chartered Bank, said the Politburo statement endorsed property easing measures at local levels.
However, “keeping the growth target unchanged could require a marginal adjustment of the zeroCovid policy. Otherwise, supportive policies won’t be able to generate the desired results”, he said.
The Politburo also said it would finish the recertification process for internet platforms and release “concrete measures” to support their healthy development.
China is expected to hold a symposium with the country’s big tech firms on the heels of the Politburo meeting yesterday, raising hopes that Beijing will stop its sweeping regulatory clampdown on the technology sector and give internet platforms larger roles to help prop up the ailing economy, according to two sources briefed on the situation.
The symposium has been set for after the Labour Day holiday, which lasts from today to Wednesday this year, to assure business executives that regulators will no longer demand rectifications or impose surprise fines, the sources, who declined to be named as the briefings were private, told the Post.
The country’s major big tech players, including e-commerce platform Alibaba Group Holding, social media and video gaming giant Tencent Holdings, online delivery and on-demand service platform Meituan, and TikTok owner ByteDance, are all invited. Alibaba is the owner of the Post.
A joint regulatory meeting is also set to take place as soon as this weekend to put all regulators on the same page regarding Beijing’s new decision to ease aggressive actions, one of the sources said.
The key message to tech companies is that the state wants them to grow and play a role in Beijing’s efforts to bolster an economy battered by Covid-19 controls, such as through the distribution of consumption vouchers, according to one source.
Some local governments have started to give away coupons to citizens through internet platforms. Shenzhen, for instance, is giving away 500 million yuan (HK$593.5 million) worth of coupons to residents through Meituan and e-commerce service provider JD.com.
Meanwhile, online ordering and delivery services provided by tech platforms have proved essential for many residents under Covid-19 lockdowns.
The Politburo meeting hosted by President Xi Jinping yesterday agreed that China will promote the “healthy development” of the internet platform economy. The central government also said it would normalise control over the tech sector and design specific measures to support the industry.
The move is the strongest policy signal to come from the Politburo, the supreme 25-member decision-making body of the Chinese Communist Party, regarding Beijing’s forceful campaign to curb the “irrational expansion of capital” since it kicked off towards the end of 2020.
Regulatory hostility in the last 18 months or so has been one of the biggest investment risks for mainland technology stocks, wiping out trillions of dollars in market value across New York and Hong Kong, while deterring venture funding for Chinese tech start-ups.
The Politburo statement yesterday was issued in the early afternoon, breaking with Beijing’s tradition of releasing statements outside market hours.
Investors in Hong Kong and Shanghai rushed to buy shares when the afternoon trading session opened, leading to a surge in Chinese tech stocks.
Alibaba rose 15.7 per cent, Tencent gained 11.1 per cent, while Meituan advanced 15.5 per cent at the close of Friday trading.
The statement largely endorsed a State Council meeting on March 16, when Vice-Premier Liu He demanded “transparent and predictable” regulation over China’s tech industry.