Systematic approach to support economy

The Political Bureau of the Communist Party of China Central Committee held a meeting on Sept 26 to study and analyze the current economic situation and make further arrangements for economic work.

As the year draws to a close, this meeting may serve as the last comprehensive deployment meeting for economic work in 2024 ahead of the Central Economic Work Conference in December, highlighting the leadership's strong focus on stabilizing the economy, growing consumer confidence, and the real estate and stock markets, among other urgent tasks.

According to the meeting, the country should effectively implement existing policies, step up efforts to roll out incremental policies, make policy measures more targeted and effective, and strive to accomplish the targets and tasks for this year's economic and social development.

To achieve the annual growth target of around 5 percent this year, China's GDP growth must exceed 5 percent in the second half of the year.

Investment and consumption growth stabilized but remained moderate in the third quarter, while exports continued to perform well, with expectations for domestic demand's contribution to GDP declining even as external demand rose.

Despite the low comparison base in the previous year, third-quarter GDP growth is anticipated to hit around 4.9 percent.

Considering measures mapped out at the key meeting, if existing policies are effectively implemented and new policies provide substantial support, domestic demand should significantly improve in the fourth quarter with exports maintaining resilience, translating to a projected GDP growth of 5.2 percent for the fourth quarter. Thus, China will likely meet its preset annual growth target this year.

It was decided at the meeting to strengthen countercyclical adjustments of fiscal and monetary policies.

The strengthened fiscal policy is primarily reflected in the issuance and effective use of ultra-long-term special treasury bonds and local government special bonds. A further six batches of ultra-long-term special treasury bonds are planned for issuance in October and November, and the issuance of local government special bonds will continue to pick up through November.

To ensure necessary fiscal spending and better leverage government investment, there is a possibility of additional treasury bond issuance or rollout of policy-based and developmental financial instruments in the fourth quarter.

The US Federal Reserve announced a significant 50-basis-point interest rate cut on Sept 18, with expectations for an additional 50-basis-point reduction by year-end, providing a favorable window for increasing countercyclical adjustments in China's monetary policy.

The meeting also underlined policies to promote the stabilization of the real estate market and stop it from further declining, marking the first time such a key meeting has explicitly outlined policies concerning the operation of the real estate market.

Expectations for the fourth quarter and early next year suggest that housing support policies will intensify, accelerating the pace for destocking housing inventories. The central bank will increase support for various financing tools to meet the reasonable financing demands of real estate companies, including private firms. It will also expedite the establishment of the real estate financing coordination mechanism to enhance liquidity support for developers, aiding in the smooth completion of ongoing projects.

Looking ahead, the real estate market is likely to reach a temporary bottom and stabilize thereafter, with home sales and housing price declines expected to narrow. This should alleviate the debt pressures on property firms and reduce liquidity risks, with land markets in first-tier cities and certain key second-tier cities potentially experiencing marginal recovery. Construction projects for government-subsidized housing, public infrastructure for both normal and emergency use, and urban village renovations may accelerate.

Looking forward, the next phase will see significant policy measures introduced in four areas.

First, the country will boost development of equity-focused mutual funds, focus on returns for investors, optimize registration for equity fund products, and promote innovations in broad-based ETFs and index products to better serve investors and national strategies.

Second, the country will enhance the institutional environment for "long-term investment" by improving regulatory inclusivity for medium- and long-term equity investments, implement assessments for periods longer than three years, and overcome institutional barriers affecting long-term investments from insurance funds.

Third, it will continuously improve the capital market ecosystem by enhancing the quality and investment value of listed companies, creating a favorable environment for medium- and long-term funds to be attracted, retained, and developed.

Fourth, it will increase central bank resources and tools to support the capital market.

The meeting also stressed prioritizing employment support for key groups such as fresh college graduates, rural migrant workers, individuals just lifted out of poverty, and zero-employment households.

Assistance will be stepped up for those facing difficulties in securing jobs, including senior citizens, people with disabilities, and those unemployed for a long time, the meeting said, adding that more assistance will also be provided to the low-income population.

Looking ahead, the next phase of livelihood work will focus on the following fronts.

First, it will likely implement a job priority strategy and improve employment support systems for key groups. This involves categorizing measures to encourage youth to engage in key industries and fields while refining job assistance systems for older and long-term unemployed individuals to ensure timely support. Additionally, it will broaden employment opportunities for rural labor and secure rural incomes by introducing new professions suited for rural vitalization.

Second, policymakers will make efforts to ensure the basic livelihoods of vulnerable groups, with measures already being taken by the Ministry of Civil Affairs and the Ministry of Finance to provide one-time subsidies to ensure funds reached those in need by Oct 1.

Third, it will increase support in education, healthcare, and elderly care to stimulate demand through improved livelihoods. Addressing residents' concerns in these areas will help alleviate their burdens and boost effective demand.

National policies have been continuously rolled out recently, exhibiting several noteworthy characteristics.

First, they are systemically comprehensive, involving multiple areas such as fiscal, monetary, real estate, consumption, and social welfare policies.

Second, there is a significant increase in policy intensity, with larger reductions in reserve requirement ratio and interest rate cuts reflecting the government's firm determination.

Third, policies are becoming more targeted, with measures addressing the current downturns in the real estate and equity markets.

Fourth, there is a focus on innovation, introducing structural monetary policy tools to support capital market financing, a first in history.

Fifth, policy coordination is emphasized, highlighting the need for monetary policy to support fiscal policy.

With the implementation of these policies, it is believed that a more comprehensive, systematic, and targeted approach will provide substantial support and impetus for the upcoming phase of economic operations.

The writer is chief economist at the Guangkai Chief Industry Research Institute and president of the China Chief Economist Forum.

The views do not necessarily reflect those of China Daily.