Chinese heads of state and government promise more economic support after the downturn

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BEIJING (AP) – Chinese leaders on Friday pledged tax cuts and support to entrepreneurs to prop up collapsing economic growth after a campaign to curb rising corporate debt caused bankruptcies and defaults among property developers.

A statement released after an annual planning session chaired by President Xi Jinping called for “maintaining stability”, reflecting fears of rising risk after economic growth hit an unexpectedly low 4.9% in September at the end of the quarter. had sagged compared to the previous year.

“The economic development of our country is under threefold pressure from a decline in demand, supply shocks and falling expectations,” the statement said.

The ruling Communist Party is trying to keep the world’s second largest economy on track while forcing real estate developers and other companies to deleverage fearing it is dangerously high and threatens financial stability and long-term growth.

“Policymakers are clearly concerned about the economy,” Macquarie’s Larry Hu and Xinyu Ji said in a report this week. “The priority is shifting from tightening regulations to supporting economic growth.”

China was the first major economy to recover from the coronavirus pandemic, but that recovery quickly flattened out. The economy expanded 7.9% year over year in the second quarter of 2021, but declined after stricter borrowing limits by real estate developers led to a slump in construction and sales last year.

The planning session, the Central Economic Labor Conference, roughly sets out the party’s economic policy agenda for the coming year. Officials usually begin disclosing details at the annual Ceremonial Legislature session in March.

The leadership promised tax cuts and “stronger support” for private companies creating China’s new wealth and jobs, but did not provide details. Beijing will be investing in infrastructure, but there is no evidence of substantial spending to stimulate the economy.

Investors are waiting to see what happens to Evergrande Group, a developer who, according to financial analysts, is increasingly likely to default on $ 310 billion in debt. Smaller developers have defaulted or gone bankrupt in debt running into millions.

The government has tried to reassure the public and investors that the economy can be protected from the financial consequences of Evergrande. Central bank governor Yi Gang said Thursday that financial markets could cope with Evergrande, suggesting Beijing has ruled out a bailout.

Friday’s statement also promised more anti-monopoly and other enforcement actions, which it said would “increase the confidence of market participants”.

Crackdown on what regulators are calling the inappropriate behavior of Chinese tech giants like Alibaba Group, the world’s largest e-commerce platform, has led nervous investors to drop their stock prices overseas by more than $ 1 trillion .

However, Chinese leaders say that enforcement will allow new competitors to thrive and make the state-dominated economy more productive.

The statement gave no indication that the ruling party was giving in to its debt reduction campaign. It echoed a party slogan, “Housing is for living, not speculating,” suggesting that Beijing will try to keep prices under control.

The statement promised to secure supplies of coal, oil, gas and electricity after bottlenecks in some major cities led to blackouts and rationing. Factories in key production areas were also temporarily closed in September in order to meet official energy efficiency targets.


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