AS usual the Economist and the Financial Times, the Wall Street Journal and many sponsored regional media outlets have termed the latest economic reforms of China as inadequate to avoid the imminent deep recession after 2008 causing many economic imbalances, social inequalities and manufacturing imperfections. It seems that the global economic watch dogs are intentionally twisting the hard facts and hard won Chinese economic stability and sustainability through equating with different baseless economic performance models and financial projections. These universal principles of objectivity, relevancy and accuracy are being compromised and compressed.
Most recently, the Chinese policymakers announced numerous major policy measures to support the country’s macro-economy, covering all important sectors including the housing market and the stock market and cuts to the policy rate and the reserve requirement ratio (RRR), all aimed at creating a favourable and supportive monetary and financial environment for stable economic growth and high-quality development. Hopefully, the policy rate and RRR cuts will release a reasonable level of liquidity, lower the financing costs for the real economy, and stimulate consumption and investment activities.
Thus it is indeed a series of major policy readjustments to integrate the numerous sectors of the economy to achieve the desired goals of socio-economic development and pace of qualitative industrialization. It is a strong signal of Chinese policymakers’ determination to ensure stable economic growth, which will boost market confidence in the country’s economic development in the rest of the year. The majority of the prominent regional economists are of the view that the strong policy support has further raised expectations that the world’s second-largest economy will be able to achieve its annual growth target of around 5 percent in 2024, despite downward pressure and external uncertainties. However, the pseudo intellectuals and paid economists have their own dubious economic interpretation polluting the credibility of the Chinese government.
The Chinese stocks reacted positively and closed significantly higher with the benchmark Shanghai Composite Index up 4.15 percent, marking the biggest single-day gain in over four years, while the Shenzhen Component Index rose 4.36 percent reconfirming reliability and economic correlation of these newly announced economic reforms boosting the confidence of the markets, investors and businessmen in the country carrying the message of economic strength, diversity, high production yields, and manufacturing speed. The further cutting of the RRR by 0.5 percentage points in the near future, which would inject about 1 trillion yuan (US$142 billion) of long-term liquidity into financial markets is a right step in right direction removing all propagated economic so-called uncertainties and negating all false and fake financial weakness in the Chinese banking & financial sector. Thus there would be no liquidity crunch in short-to-medium and long terms in China consolidating all sectors of economy and production.
Additionally, the Central Bank of China will lower the interest rate of seven-day reverse repos from 1.7 percent to 1.5 percent, while the interest rate for the medium-term lending facility will likely drop by about 0.3 percentage points, and the long-term lending facility and deposit rates will decrease by 0.2 to 0.25 percentage points. Therefore, it will further enhance China’s financial transparency and credit facility to the private sector providing all possible support and strategic cushion needed for robust economic growth. In the case of the housing market, the PBC chief announced that China will lower mortgage rates on existing home loans by an average of 0.5 percentage points, and reduce the national minimum down payment requirement to 15 percent on second homes, among other measures. So it is a giant step towards the right direction propelling the housing and real estate industry towards greater stability and sustainability.
It seems that it is an accommodative monetary policy stance, for strengthening the intensity of monetary policy regulation, improving the precision of monetary policy regulation, and creating a favourable monetary and financial environment for stable economic growth and high-quality development. Interestingly, the policy makers and regulators of China also announced supportive measures for the small and micro enterprises. The National Financial Regulatory Administration (NFRA) will work with the National Development and Reform Commission, the country’s economic planner to establish a working mechanism to support financing coordination for small and micro enterprises.
To support stable operations of major commercial banks, China plans to inject the tier-1 capital into six major commercial banks in an orderly manner, with coordinated advancement, phased implementation and tailored policies. These are indeed significant policy measures which will help reduce the costs of capital and provide a strong policy boost for the continuous development of the Chinese economy. In summary, all economic indicators suggest that China’s GDP growth target will be achieved despite all western propaganda of the so-called China’s economic collapse moving towards recession although its consumption and domestic saving strongly reject these economic falsehoods.
Tackling of ongoing challenges in China’s real estate market through the minimum down payment for second-home mortgages vividly reflects the real essence of the Chinese unique economic model supporting people’s centric policies by avoiding strict principles of capitalism, always preferring profits over people. It will be further lowered from 25 percent to 15 percent nationwide. Hopefully, the new package of policies, coupled with those already in place, including the issuance of ultra-long special treasury bonds to support large-scale equipment renewal, will lay a solid foundation for strong economic growth in the fourth quarter of the year. And with strong fourth-quarter growth, the growth target of around 5 percent will be reached. The newly announced economic reforms are timely, integrated, productive and progressive, participatory singling the message of positivity, productivity, and purposefulness.
—The writer is President, Pak-China Corridor of Knowledge, Executive Director, CSAIS, regional expert: China, CPEC & BRI.
