On Tuesday, Zheng Shanjie, the chairman of China’s National Development and Reform Commission (NDRC), committed to a series of measures aimed at strengthening the country’s economy during a highly anticipated press conference. However, he refrained from unveiling any new significant stimulus initiatives, resulting in disappointment among investors and causing a decline in the preceding rally within mainland Chinese markets.
A senior official of the NDRC stated that China would expedite the issuance of special purpose bonds to local governments to enhance regional economic growth. Zheng announced that 1 trillion yuan in ultra-long special sovereign bonds had been fully allocated for local projects and promised the continued issuance of ultra-long special treasury bonds in the following year. Additionally, the central government plans to introduce a 100 billion yuan investment scheme for the next year by the end of this month, earlier than initially planned.
Zheng also assured the release of further measures to support the property market and boost domestic spending. He was speaking at a briefing alongside four other key officials from the country’s economic planning agency. This briefing coincided with the reopening of mainland China’s markets following Golden Week, a weeklong holiday commencing on September 30.
On Tuesday morning, Chinese stocks opened significantly higher, extending the rally observed before the holiday. Key indexes in mainland China— the Shanghai Composite Index, CSI 300 blue-chip index, and SZSE Component Index—saw surges exceeding 10% in early trade.
China’s leadership had previously signaled urgency in addressing a prolonged economic downturn that threatened the country’s goal of achieving an annual growth rate of “around 5%.” Leading up to the holiday, Chinese authorities had advocated for increased fiscal and monetary policy support at a monthly meeting involving top Communist Party officials and introduced several stimulus measures to halt the decline in property prices.
The economic slowdown in the world’s second-largest economy occurred in the wake of an underwhelming recovery from COVID-19 lockdowns, influenced by weak domestic demand and a persistent property downturn. In the first half of the year, China’s economy grew by 5.0% compared to the previous year, aligning with the central government’s target, though GDP growth in the April-June quarter was 4.7%, missing expectations, and marking the slowest growth since the first quarter of 2023.
In August, China’s consumer price index rose by 0.6% year on year, falling short of the anticipated 0.7%, while the core-CPI, excluding food and energy prices, increased by 0.3%, signifying a slower rise for the second consecutive month. China’s factory activity experienced contraction for the fifth month in a row in September, with the official purchasing managers’ index (PMI) registering at 49.8. A PMI above 50 indicates expansion, while below 50 reflects contraction.
The Caixin PMI for the same period was 49.3, marking the sharpest contraction in 14 months, spurred by declining demand and a weakening labor market.
In March, Zheng addressed the intention to continue reinforcing macroeconomic policies at a high-level press conference, involving the coordination of fiscal, monetary, employment, industrial, and regional policies as China persistently adjusts its macroeconomic policy framework. Zheng acknowledged the persistence of “many difficulties and problems” in striving to meet the country’s expected growth targets, according to CNBC’s translation of his Mandarin-language remarks.
