In a decisive move to ensure steady economic growth, Xi Jinping, General Secretary of the Communist Party of China (CPC) Central Committee, chaired a pivotal meeting of the Political Bureau of the CPC Central Committee on Thursday. The meeting focused on analyzing the current state of China's economy and outlining further strategies to bolster economic performance, signaling a robust commitment to stabilizing the world's second-largest economy.
Despite facing \"new situations and problems\" in the economic landscape, the fundamentals of the Chinese economy remain strong. The vast market, economic resilience, and significant potential continue to provide a solid foundation for growth. The CPC emphasized the importance of adopting a comprehensive and objective view of the current economic situation, addressing challenges head-on, and maintaining confidence in the nation's economic trajectory.
Key to the CPC's strategy is the effective implementation of existing policies, coupled with the introduction of incremental measures. These efforts aim to make policy actions more targeted and effective, ensuring that the targets and tasks for this year's economic and social development are met.
Fiscal and Monetary Policies
The Political Bureau underscored the necessity of enhancing counter-cyclical adjustments in fiscal and monetary policies. This includes the issuance and strategic use of ultra-long special treasury bonds and local government special-purpose bonds to leverage government investment effectively. Additionally, the meeting highlighted plans to reduce the reserve requirement ratio (RRR) and implement impactful interest rate cuts.
Following the meeting, the People's Bank of China (PBOC) announced a comprehensive package of monetary easing measures that exceeded market expectations. PBOC Governor Pan Gongsheng revealed that the RRR would be cut by 0.5 percentage points in the near future, injecting approximately 1 trillion yuan (about $141.78 billion) in long-term liquidity into the financial market. Depending on market conditions, the RRR may be further reduced by 0.25 to 0.5 percentage points within the year, potentially releasing up to 2 trillion yuan in liquidity and reducing banks' liability costs by around 8 billion yuan.
Moreover, the central bank plans to lower the interest rate of seven-day reverse repurchases from 1.7 percent to 1.5 percent. This adjustment aims to guide the loan prime rate and deposit rate downward, maintaining stability in the net interest margin of commercial banks.
Property Market Stabilization
The CPC meeting also addressed the need to stabilize and reverse the downturn in the property market. Data from the National Bureau of Statistics revealed declines in both new and second-hand home prices in China's large- and medium-sized cities for August. In response, the CPC leadership emphasized strict regulation of commercial housing construction, optimization of existing inventory, and enhancement of quality.
Efforts will be made to boost lending for \"whitelist\" projects and facilitate the revitalization of idle land. Commercial banks have already approved over 5,700 \"whitelist\" projects, with financing reaching 1.43 trillion yuan and support for the timely delivery of over 4 million housing units.
Additionally, the PBOC announced that mortgage rates on existing home loans will be lowered to levels comparable to newly issued housing loans, with an average reduction of around 0.5 percentage points. This policy is expected to benefit approximately 50 million households, reducing their total interest expenses by about 150 billion yuan annually, thereby stimulating consumption and investment.
The minimum down payment ratio for both first and second homes will be unified, with the nationwide minimum down payment ratio for second homes being reduced from 25 percent to 15 percent. These measures are designed to make housing more accessible and support the real estate market's recovery.
Reference(s):
Key takeaways from CPC leadership's meeting on economic work
cgtn.com
