The world's second largest economy is preparing to launch a vast program of measures aimed at boosting its flagging growth. After months of hesitation, Beijing finally seems ready to draw the heavy artillery to revive an economy weighed down by the real estate crisis and weak consumption.
China mobilizes its forces to revive its economy
China is set to unveil a new economic recovery plan on Tuesday, as the country faces persistent headwinds.
This announcementplanned during a press conference of the National Commission for Development and Reforms, comes in a context of marked slowdown, particularly in the key sectors of real estate and consumption.
This new government effort comes barely ten days after a first wave of measures which electrified the financial markets. The Chinese authorities therefore seem determined to stay the course and intensify their efforts to reinvigorate the world's second largest economy.
Among the expected provisions are:
- Tax cuts to stimulate household consumption
- A massive bond issue to finance major infrastructure projects
- New aid for the struggling real estate sector
- Targeted support measures for SMEs and employment
The authorities seem determined to achieve the 5% growth target set for this year at all costs, a figure considered very ambitious by many experts. This desire for an all-out recovery contrasts with the more cautious approach adopted in recent months.
Persistent structural challenges
Despite the scale of the measures announced, some analysts remain cautious about their long-term effectiveness. Alicia Garcia Herrero, chief economist for Asia-Pacific at Natixis, highlights the need for deeper structural reforms:
“ Unless China introduces fundamental changes, such as improving the social welfare system, I doubt we will see a major change. »
Reducing debt in the real estate sector and sustainably stimulating domestic consumption remain crucial issues for the Chinese economy. The case of real estate developers Country Garden and Evergrande, on the verge of bankruptcy, illustrates the persistent fragility of the market.
The financial markets reacted positively to the announcement of this recovery plan, with a significant increase in Chinese stock markets. However, only a sustained economic recovery in the coming months will make it possible to judge the real effectiveness of these measures. The upcoming publication of the growth figure for the third quarter will be a key indicator to assess the initial impact of this ambitious plan on the Chinese economy.
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