China’s ruling Politburo pledged to stabilize growth while pressing on with economic reforms after exports fell by the most since the global financial crisis and manufacturing and investment cooled.
Authorities will maintain steady second-half expansion amid “extremely complicated domestic and international conditions,” the official Xinhua News Agency said yesterday after a meeting led by President Xi Jinping. China will keep a prudent monetary policy and a proactive fiscal stance, Xinhua said.
China is targeting 7.5 percent growth this year, a goal that could be under threat after a second straight quarterly slowdown. Authorities also want to counter mounting debt risks, with policy makers ordering an audit of government borrowing this month and engineering a money-market cash squeeze in June to encourage banks to better manage liquidity.
“The policy focus will shift to stabilizing growth in the second half,” in line with recent remarks by Premier Li Keqiang, said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong. The economy will bottom out in July and August and the government will use fiscal and monetary policy to support growth, Shen said.
The Shanghai Composite Index rose 0.8 percent at 9:53 a.m. local time, headed for the second straight gain.
Separately today, National Development and Reform Commission Chairman Xu Shaoshi said China has the confidence and capabilities to realize about 7.5 percent growth this year, even as achieving that level requires “arduous efforts.” Xu, head of the top economic-planning body, commented in a webcast transcript posted on the central government’s website.
Li said last week that the nation will speed railway construction, especially in central and western regions, according to a Xinhua story. He said at a recent meeting with economists that 7 percent expansion is the “bottom line” and the nation can’t allow growth below that, while 7.5 percent is the “lower limit” for gross domestic product growth, the Beijing News reported last week.
The Politburo, short for Political Bureau, comprises the Communist Party’s 25 most-senior officials.
The Politburo yesterday also pledged to fine-tune economic policies when needed while stabilizing trade, expanding export channels and maintaining “reasonable” investment growth, according to Xinhua. China will promote reform of the fiscal, tax and financial systems and seek “stable and healthy” development in the property industry, Xinhua reported.
China will ensure major tasks in full-year economic and social development are completed, according to Xinhua. Authorities will coordinate the multiple tasks of stabilizing growth, restructuring the economy and promoting reforms, Xinhua reported.
Yesterday’s report “signals no change of policy stance” and the broader message “does not show a sense of urgency” compared with an April 25 statement, Zhang Zhiwei, chief China economist at Nomura Holdings Inc. in Hong Kong, said in a note.
The Politburo Standing Committee said in April that the nation “needs to cement its domestic economic-growth momentum and guard against potential risks in financial sectors.”
Xi said July 25 that reducing excess capacity is key to restructuring the economy, Xinhua said in a separate article yesterday.
Exports unexpectedly fell 3.1 percent in June from a year earlier, the most since 2009, while first-half fixed-asset investment excluding rural areas grew 20.1 percent, the slowest pace for the period since 2001. A preliminary survey of purchasing managers showed China’s manufacturing weakened by more than estimated in July.
Last week, China announced what Bank of America Corp. called a “small stimulus,” expanded a crackdown on wasteful government spending and ordered cuts in manufacturing overcapacity. Efforts to sustain growth include small-company tax breaks and speeding up railway construction, while frugality measures include a five-year ban on building government offices.
China’s central bank yesterday conducted reverse-repurchase operations for the first time in five months, helping alleviate a cash squeeze that drove the benchmark interbank lending rate to a four-week high.