China’s Politburo pledges policy support, spending to counteract sluggish growth

Beijing has pledged to step up macro policy support and enhance the resilience of capital markets for the remainder of the year, sending signals to stablise growth amid a recent slowdown in economic activity and rising volatility in global markets. After a meeting of the Communist Party’s 21-member Politburo – a major decision-making body led by President Xi Jinping – that ended on Thursday, the party’s upper echelon vowed to accelerate the pace of fiscal spending and speed up the transition from old to new growth drivers. “[We need to] fully leverage the effectiveness of existing policies and roll out practical and effective incremental measures in a timely manner,” the Politburo said, according to a statement published by state news agency Xinhua. Amid growing concerns from Western politicians over China’s widening trade surplus, the leadership also urged the country to “expand the scope for mutually beneficial international economic and trade cooperation” and “promote more balanced trade development.” The Politburo also said the fifth plenary session of the party’s powerful Central Committee would be held in October. This session carries particular importance, as it comes a year before the party’s next national congress, when a major leadership reshuffle is expected and Xi could be elected to a fourth term as general secretary. Analysts said the meeting sent a more supportive signal to stabilise growth as the country’s economy faced “challenges and difficulties,” but stopped short of suggesting a large-scale stimulus package, instead pointing to more targeted measures. The emphasis is on measures that are practical and effective – in other words, policies that deliver tangible results Ding Shuang, Standard Chartered “The focus remains on making better use of existing policies, while keeping additional measures in reserve,” said Ding Shuang, chief economist for Greater China and North Asia at Standard Chartered. “It’s not simply a matter of spending more money,” Ding added. “The emphasis is on measures that are practical and effective – in other words, policies that deliver tangible results.” The meeting was held in the wake of second-quarter figures that showed a slowdown in gross domestic product despite strong trade numbers, a dichotomy indicating a widening gap between surging exports and sluggish activity at home. The elevated trade surplus has also fuelled pushback from the West, with politicians in the European Union and the United States threatening or taking action against China’s industrial overcapacity – a claim Beijing denies. Su Yue, principal economist for China at the Economist Intelligence Unit, said the explicit reference to “trade balance” in the readout suggested Beijing was becoming more sensitive to international concerns over China’s trade surplus and sought to create greater room for external cooperation. “Although this alone is unlikely to fundamentally ease trade tensions, it points to a more pragmatic tone that could provide a modestly more stable backdrop for US-China economic relations,” she added. “EU-China trade relations will remain under strain due to structural issues.” Working teams from Beijing and Brussels have held more than 20 meetings in the past month, following an initial round of trade talks in Brussels between Chinese Commerce Minister Wang Wentao and his European counterpart Maros Sefcovic, commerce ministry spokesman He Yadong said on Thursday. “China is ready … to explore practical, workable solutions to each side’s concerns in trade and economics,” He said. Top policymakers have also been wary of heightened volatility in global capital markets, with hi-tech stocks facing a broad sell-off on concerns that an artificial intelligence-driven rally may have outpaced fundamentals. Against this backdrop, the Politburo underscored the importance of deepening reforms to capital market investment and financing, while “enhancing the resilience and confidence of capital markets.” Ding pointed to recent intervention by the “national team” – state-backed institutions that support domestic markets – and said stabilising the capital market can help improve household balance sheets and support domestic consumption. China’s gross domestic product growth slowed to 4.3 per cent in the second quarter – the softest quarterly expansion since late 2022, down from 5 per cent in the first quarter. Growth for the first half stood at 4.7 per cent, remaining within the “4.5 to 5 per cent” target range set for the year. The Politburo reiterated the importance of “effectively expanding domestic demand” and unlocking the potential of the services sector, and said Beijing would make comprehensive use of monetary policy tools and “adjust them as appropriate”, while improving co-ordination between fiscal and financial policies to boost domestic demand. It also stressed the need to strengthen social welfare, protect the rights of flexible and gig workers, and ensure agricultural production. Su Jian, an economics professor at Peking University, said the readout placed greater emphasis on boosting domestic demand, expanding service consumption and promoting trade in services. “Strengthening social welfare can help reduce income inequality and ease consumers’ concerns about the future, thereby supporting consumption,” he said. Meanwhile, analysts also pointed to infrastructure investment as an effective tool for boosting domestic demand and stabilising growth in the second half of the year, as the readout underscored the need to advance the construction of the “six networks” – a broad infrastructure initiative covering water, power, computing, next-generation telecommunications, underground utilities and logistics networks. China’s contracting fixed-asset investment, coupled with a higher incidence of natural disasters this year, leaves policymakers ample room to ramp up infrastructure spending, Ding said. Amid a rise in extreme weather events this year, the readout stressed the need to “resolutely prevent major accidents”, strengthen risk identification and mitigation, and step up flood control, emergency response and disaster relief efforts. Other priorities outlined in the readout included continuing efforts to tackle “involution-style” competition, stabilising the property market and pressing ahead with the government’s debt-restructuring plan. Separately, Xi held a symposium on Friday with representatives of the country’s non-communist political parties to hear their views on the current economic situation and priorities for the second half of the year, the People’s Daily reported on Thursday. Xi said that China’s economy had “pressed ahead under pressure” and “showed strong resilience and vitality” in the first half of the year, while acknowledging “some difficulties and challenges”, as reported by the Communist Party’s official press organ. The president emphasised the need to strengthen the effectiveness of macro policy in the second half of the year, prioritising the tapping of potential domestic demand, deepening the integration of technological and industrial innovation, improving people’s livelihoods and continuing to defuse risks in key sectors. Additional reporting by Xiaofei Xu

China’s Politburo pledges policy support, spending to counteract sluggish growth

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}The high-level decision-making body also set October for the fifth Central Committee plenum, which will set the stage for next year’s party congress

The high-level decision-making body also set October for the fifth Central Committee plenum, which will set the stage for next year’s party congress