With an aim to bolster support for private companies, China is set to introduce new legislation to deepen economic reforms, particularly focusing on financial institutions, said Lou Qinjian, the spokesperson of the National People’s Congress (NPC), during a press conference on Monday.
The move comes as China intensifies efforts to stimulate its economy ahead of an upcoming key Politburo meeting, where the country’s economic performance in the first half of the year will be reviewed. Over the past week, authorities have unveiled a series of pledges targeting specific sectors and aimed at reassuring private and foreign investors about a more conducive investment environment. However, many of these measures were broadly outlined, with some lacking concrete details.
China is poised to unveil its growth target for 2024 and present its strategy for bolstering the decelerating economy during the country’s prominent annual political assembly this week.
Premier Li Qiang will present the government work report at the National People’s Congress on Tuesday, marking his inaugural delivery of the report. Authorities aim to navigate a path towards recovery following a tumultuous year characterized by deflationary pressures, an enduring property market crisis, escalating debt levels, and a significant outflow of foreign capital.
In 2023, China’s economy expanded at a rate of 5.2% annually, surpassing the government’s target. Despite signs of improvement in indicators such as factory output and retail sales, most economists are predicting a slowdown in the coming years, which could have repercussions for global growth. Additionally, Chinese stock markets have been experiencing a downturn since late 2023, resulting in significant losses over the past few years.
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The real estate sector has been particularly affected, with a downturn exacerbated by the COVID-19 pandemic, leading to job losses and cautious consumer spending. Some economists warn of the possibility of a deflationary spiral as housing and other prices decline, potentially dampening investment and hindering economic recovery.
The ongoing property crisis in China poses significant challenges. Numerous developers have defaulted on their debts, with China Evergrande being the largest, attempting to address over $300 billion in debts. The restructuring plans of Evergrande are set to be discussed in a Hong Kong court next week.
It remains uncertain how the new policies will impact the property market crisis. Land sales have traditionally been a major revenue source for heavily indebted local governments. Simultaneously, the halt in construction of new homes has adversely affected contractors, suppliers of construction materials, and home furnishings providers, resulting in job losses across the economy. Declining sales of new homes and home prices have further deterred consumer spending, given that property constitutes a significant portion of Chinese families’ wealth. Overall, the real estate industry plays a substantial role, accounting for more than a quarter of business activity in China.
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