Commentary: Unusual Politburo Meeting Outlines Measures to Supercharge Growth

China’s top leaders held a Politburo meeting on September 26, reflecting an urgent need to stabilize the economy [para. 1]. Normally, economic discussions occur in April, July, and December, so this shift to September suggests a significant commitment to reviving growth [para. 2]. The main issues identified were an imbalance between supply and demand, specifically weak domestic demand, leading to a divergence between actual and nominal economic growth rates, and undermining consumer confidence and spending [para. 3].

The meeting called for calm and urged officials to face difficulties, strengthen confidence, and address economic challenges [para. 4]. Existing policies need to be effectively implemented and new ones accelerated to meet economic and social development goals. Economic data from July and August indicate third-quarter GDP growth might dip below 4.7%, endangering the annual target of around 5%. While some policies have shown effects, sectors like consumer spending, business investment, and real estate remain unstable, requiring stronger support [para. 5].

The meeting emphasized intensifying fiscal policies and maintaining necessary expenditures. It highlighted the importance of using ultra-long special sovereign bonds and local government special bonds to enhance fiscal measures [para. 6]. This year, the planned fiscal deficit and additional bonds bring the total to nearly 10 trillion yuan. However, fiscal spending has been weak due to slower revenue growth and bond issuance delays [para. 7].

To enhance fiscal policies, three areas were suggested: 1) Issuing additional government bonds to cover revenue gaps, support local governments, provide subsidies, and fund major projects for the next five-year plan [para. 8]. 2) Accelerating the issuance of special bonds and converting some quotas into general bonds [para. 9]. 3) Optimizing deleveraging policies for local governments [para. 10].

More aggressive monetary easing was also discussed, including possible reserve requirement rate (RRR) cuts and policy rate reductions. The central bank already announced a 0.5 percentage point RRR cut, releasing 1 trillion yuan liquidity. Governor Pan Gongsheng suggested another cut is possible this year [para. 11]. The central bank also plans to lower policy interest rates, affecting the entire rate system. The medium-term lending facility rate was reduced to 2% from 2.3%. Policy and loan rates are expected to decrease after the National Day holiday [para. 12].

Initiatives to boost the capital market include attracting long-term investors, supporting M&A, and promoting public fund reforms to protect small and medium-sized investors [para. 13].

In the property sector, new goals were set to "stop the decline of the property market,” limit new housing supply, and adjust housing purchase restrictions, now only enforced in six regions. The meeting emphasized boosting loan support for eligible projects, lowering interest rates on existing home loans, and revitalizing idle land [para. 14].

The meeting also stressed supporting the private sector by standardizing regulatory practices and promoting a law for the private economy, addressing confidence declines among private entrepreneurs [para. 15]. Key measures include gathering input from entrepreneurs before policy changes, developing a negative list management approach, enhancing institutional frameworks, and enforcing rule of law [para. 16].

Lastly, the leaders highlighted the importance of maintaining employment, focusing on key groups like college graduates, migrant workers, and vulnerable populations. This year’s economic challenges have strained the job market, necessitating an employment strategy ensuring stable work and protections. Efforts will target economic development and employment coordination, addressing structural employment issues, and strengthening support for specific groups [para. 17]. The Ministry of Civil Affairs and the Ministry of Finance plans to distribute one-off cash handouts to residents facing hardship [para. 18].

Luo Zhiheng, the chief economist at Yuekai Securities, notes that the opinions expressed are those of the authors and do not reflect Caixin Media’s editorial stance [para. 19][para. 20][para. 21].