Learn about China's most prominent measures to revive its economy

Highlights: Learn about China's most prominent measures to revive its economy. China is seeking to recover its economy from a decline caused by the repercussions of real estate sector pressures, as well as the remaining effects of the Covid-19 pandemic. The benchmark CSI 300 index has fallen about 4% so far in 2024, and is trading near a 5-year low. The yuan has joined most other Asian currencies falling this year, while the yield on benchmark government bonds has fallen to its lowest levels in nearly 22 years ago.

China is seeking to recover its economy from a decline caused by the repercussions of real estate sector pressures, as well as the remaining effects of the Covid-19 pandemic, and in this topic we review its most prominent measures for this purpose this January.

A court in Hong Kong recently ruled to liquidate the Chinese company Evergrad Real Estate (Anatolia)

China has intensified measures in recent weeks to support the economy and declining markets, highlighting concerns about a recovery hampered by the real estate crisis, deflation and weak consumer confidence, Bloomberg reported.

The measures included pumping more long-term cash into banks, tightening short-selling rules, and expanding access to loans for real estate developers, but investors may need to see more measures to restore their confidence in Chinese markets, according to the agency.

The benchmark CSI 300 index has fallen about 4% so far in 2024, and is trading near a 5-year low. The yuan has joined most other Asian currencies falling this year, while the yield on benchmark government bonds has fallen to its lowest levels in nearly 22 years ago today, amid bets on further monetary easing.

Additional aid for the economy may be necessary if the Chinese government wants to announce an ambitious expansion target this year, when the national legislature convenes next March. Many Chinese provinces are targeting GDP growth of 5% or more in 2024, and economists are already anticipating an ambitious target. To some extent, these measures were announced by China to support its economy and calm investors, since the beginning of the year, according to Bloomberg:

January 28: Restrictions on securities lending

Securities regulators said they will stop lending some stocks to short sellers, in the latest attempt to put an end to a stock market decline, so strategic investors, which they usually refer to as holders of restricted stock, will not be allowed to lend stocks during agreed-upon lock-up periods.

January 27: Real estate facilitation

Guangzhou, one of China's largest cities, has eased restrictions on home purchases in an attempt to stop falling prices, and Beijing, Shanghai and Shenzhen have reduced down payment requirements since last November.

January 26: Aid for real estate developers

The Ministry of Housing, Urban and Rural Development said it will provide a list of housing projects eligible for financing support by the end of this month, in the latest attempt to boost lending for real estate to slow the sector's decline.

The National Financial Regulatory Authority urged banks to support applications from eligible developers, including extending existing loans and modifying repayment arrangements.

January 24: Reducing the required reserve ratio and real estate loans

The governor of the People's Bank of China, Pan Gongsheng, said that the central bank will reduce the reserve requirement ratio (the amount of cash that banks must hold in reserve) by 0.5% on February 5, to release one trillion yuan ($139 billion) of long-term liquidity. term to market.

This announcement came after official data showed that the country's economy still faces major challenges, and it is the largest reduction in the required reserve ratio since 2021.

On the same day, authorities in China and Hong Kong announced steps to deepen financial ties, including facilitating real estate purchases and expanding a program allowing personal investments in the Greater Bay Area, a region with a population of 70 million that includes Hong Kong and major cities on the southern mainland; Such as: Shenzhen, Guangzhou.

January 23: Stock rescue package

Bloomberg reported that officials are considering using about 2 trillion yuan ($281.6 billion), mostly from the offshore accounts of Chinese state-owned companies, as part of a stabilization fund to buy local stocks through the Hong Kong Stock Exchange.

They allocated at least 300 billion yuan ($42.24 billion) of local funds to invest in local stocks.

January 19: Signs of state buying

Total trading volume at some of the country's largest exchange-traded funds, typically watched for signs of state-led buying, was the third-largest weekly total on record, and was the largest since July 2015.

January 16: Special Bonds

Bloomberg reported that China is considering issuing new debt worth one trillion yuan ($140.8 billion) under the so-called special sovereign bond plan. The proposal discussed by senior policymakers will include the sale of long-term sovereign bonds, to finance projects related to food, energy, supply chains and urbanization.

January 5: Rental housing

The People's Bank of China (the central bank) and the National Public Relations Authority of China published guidelines for financial support for the development of the rental housing market, including a policy to encourage banks to provide loans to developers, industrial zones, and some rural organizations and companies, to build new homes for long-term rental.

Source: Al Jazeera + Agencies + Bloomberg