China’s Politburo promises support for the economy but gives few details

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China’s leaders have vowed to boost consumer spending, tackle unemployment and provide more support to the ailing property sector as the world’s second-largest economy makes a “difficult” recovery from the pandemic.

But promises of more stimulus in the second half of the year from the ruling Politburo of the Communist Party were light-hearted and disappointing growth in the second quarter was unlikely to reassure worried investors.

A readout of an eagerly awaited meeting of the 24-member Politburo on Monday said it believed economic reform was making “difficult progress” and that it was “necessary to actively expand domestic demand” and “expand consumption by increasing residents’ incomes”.

“It is necessary to promote the consumption of automobiles, electronic products and home furnishings, and to promote the consumption of services such as sports, leisure and cultural tourism,” the meeting said, according to a report by state news agency Xinhua.

China’s economy grew less than 1 percent in the second quarter compared with the previous three months, after an initial rebound following the easing of harsh COVID-19 restrictions in December as business and consumer confidence slumped.

The country’s once powerful property sector, which has suffered a slump in demand following restrictions on leverage in recent years, fell further in the second quarter after a strong start to the year.

Julian Evans-Pritchard, head of China economics at Capital Economics in Singapore, said the lack of details on the scale of the measures promised in the announcement meant investors would remain in a wait-and-see position. “Given how bad things are at the moment, it’s a bit disappointing that they didn’t give us some figures,” Evans-Pritchard said.

He said China’s leadership is clearly concerned. The statement mentioned “risks” seven times, three times more than the more optimistic findings of the last Politburo meeting devoted to the economy in April.

But “they are not so desperate that they feel the need to resort to the old-school, big-bang stimulus used after the global financial crisis of 2008,” Evans-Pritchard said.

The government eased policy interest rates last month and increased credit support for developers this month, while also trying to reassure business that the regulatory crackdown on Internet entrepreneurs in recent years is over.

“It is necessary to . . . encourage enterprises to dare to venture, dare to invest, dare to take risks and actively create markets,” the Politburo said on Monday.

Among other measures, it promised to accelerate the issuance of local government special bonds. Many local governments, heavily in debt, need the money to pay salaries and start investment activities.

It also said the government needed to “stabilise” foreign trade and foreign investment, both of which are under pressure, and increase international flights, which are yet to fully recover from the pandemic.

The Politburo also stressed on the problem of employment, saying that it would be given strategic priority. Youth unemployment in China has reached record levels, although the broad official unemployment rate is stable.

The statement said the external environment was “complex and grim”, but the leader remained confident of reform.

It added, “Our economy has tremendous resilience and capacity for growth and the long-term positive fundamentals have not changed.”

The meeting followed a number of support measures announced by Chinese regulators in recent days, including actions to stimulate consumption of manufactured goods such as cars and electronics after a slump in factory activity.

Chinese real estate shares in Hong Kong fell to their lowest levels in more than eight months ahead of the Politburo statement, as concerns over a lack of liquidity at two of the biggest developers, Country Garden and Dalian Wanda, hit the sector. The Hang Seng Mainland Property Index closed down 6.42 per cent on Monday.

Some analysts said the Politburo statement omitted President Xi Jinping’s trademark statement that “houses are for living in, not for speculation”, adding that it could signal that the government would further ease restrictions imposed in previous years to cool the market.