Stable yet advancing: The most precise take on China's economy

Editor's note: Liu Chunsheng, a special commentator on current affairs for CGTN, is an associate professor at the Beijing-based Central University of Finance and Economics. The article reflects the author's opinions and not necessarily the views of CGTN.

On September 26, 2024, the Political Bureau of the Central Committee of the Communist Party of China held an important meeting to conduct an in-depth analysis and research on the current economic situation and to scientifically deploy the next steps for economic work.

While recognizing that the overall economic performance had been stable with progress since the beginning of the year, the meeting also pointed out some new situations and issues in the current economic operations.

From January to August 2024, China's macroeconomic operations have been facing challenges under a complex and changing domestic and international backdrop. Affected by factors such as extreme weather disruptions, insufficient effective domestic demand, and a high base from the same period last year, downward pressure on the economy has intensified.

Although the government has implemented a series of counter-cyclical adjustment policies, the foundation for economic recovery remains unstable, with some economic indicators showing a decline. Specifically, economic growth has slowed down more than expected, indicating greater downward pressure.

Macroeconomic policies require the government to take more vigorous measures to stabilize growth, expand domestic demand, adjust structures and prevent risks to ensure the smooth completion of the annual socio-economic development goals.

The meeting emphasized the need to view the current economic situation comprehensively, objectively, and calmly, recognize difficulties, maintain confidence and truly enhance the sense of responsibility and urgency in doing economic work.

The targets set in the government work report at the beginning of the year, such as a GDP growth of around 5 percent and an urban surveyed unemployment rate of around 5.5 percent, are not only quantitative requirements for economic development but also solemn commitments to the well-being of the people. Faced with these challenges, the Chinese economy has the confidence and capability to achieve these goals.

The meeting clearly decided "to increase the strength of counter-cyclical adjustments in fiscal and monetary policies," which is both an active response to the current economic situation and a proactive strategy for future economic trends. The People's Bank of China announced that it would reduce the reserve requirement ratio for financial institutions by 0.5 percentage points starting from September 27, 2024. Such a measure should release further liquidity, reduce financing costs for the real economy and inject more vitality into the market.

On the fiscal policy side, ultra-long special treasury bonds and special-purpose bonds for local governments will be issued and used effectively, better leveraging the role of government investment, ensuring necessary fiscal expenditures, especially focusing on the "three guarantees" at the grassroots level and stabilizing market expectations.

Concerning the development of China's real estate, the meeting explicitly proposed "promoting the stabilization and recovery of the real estate market" and specifically deployed several measures, including strict control over the increment of commercial housing construction, optimizing existing stock, and improving quality, among others. These measures aim to tackle the real estate market pressure multi-dimensionally, boost market confidence and promote the steady and healthy development of the real estate market.

It also emphasized the need to strive to boost the capital market by vigorously guiding long-term funds into it, unblocking entry barriers for social security, insurance, wealth management and other funds, supporting mergers and acquisitions of listed companies and steadily advancing reforms in public fund offerings, thus infusing fresh blood into the capital market.

These measures will not only help improve the liquidity and activity of the capital market but also effectively boost investor confidence and promote capital formation and economic development. The signal of the meeting to revitalize the economy is very strong, and it particularly mentioned efforts to boost the capital market, which is encouraging and constitutes a double benefit for earnings and valuations in the stock market. As a result, the A-share market has been rising continuously, with the Shanghai Composite Index recapturing the 3,000-point mark.

The spirit of this meeting reflects a profound insight into the current economic situation and a scientific deployment for future economic development. Using a series of targeted and highly effective policy measures, the Chinese economy will effectively address various challenges and achieve its annual socio-economic development goals.

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