China announced 33 ways to put the economy on the right track

A policy package of 33 solutions will help bring the foundation Chinese economy return to normal operations while keeping key economic indicators within appropriate ranges – Xinhua reported after the May 23 regular meeting of China’s State Council chaired by Premier Li Keqiang. .

The State Council’s announcement comes as many analysts warn that Beijing will find it difficult to achieve its economic growth target of “about 5.5%” this year, as the country still adheres to adhere to strict COVID-19 control measures.

The prolonged shutdowns across the country have taken a toll on livelihoods and consumption, costing many jobs, closing businesses and constraining both supply and demand.

Premier Li Keqiang warned, electricity production, freight volume and bank loans have all fallen since April. Without a definite GDP growth, steady employment will not be possible.

“It is a good thing that we have curbed the excessive money supply and massive stimulus in the past few years, and we still have backup policy tools,” Premier Li Keqiang said.

The latest economic stimulus measures include pledging more financial support to many industries through tax refunds, tax cuts and fee reductions.

These measures will bring the total amount of tax refunds and tax breaks under the government’s plan to 2.64 trillion yuan ($396 billion) for 2022. Loan quotas support small businesses and micro will also double for banks.

Meanwhile, the government will also support banks by allowing borrowers to defer repayment of principal and interest until the end of the year.

Some measures are aimed at boosting consumption, especially through easing car and home purchases. That will reduce at least 60 billion yuan ($9 billion) in taxes on some passenger cars, while more city-specific policies will be introduced to boost housing demand.

Such measures should help lessen the severity of an economic growth slowdown or even a recession, according to Nomura economists, but they remain cautious about the growth outlook for the year.

The Investment Bank of Japan estimates, GDP growth China’s second quarter will slow significantly to 1.8%, a sharp decline from 4.8% in the first quarter. And now, Nomura predicts China’s full-year economic growth could hit just 3.9% – well below the “about 5.5%” target.

The State Council also announced support for infrastructure, railways and aviation, including the issuance of railway construction bonds worth 300 billion yuan ($45 billion); 200 billion yuan in bonds for the aviation industry; and 150 billion yuan in emergency loans for the civil aviation industry, and launched a new round of rural road construction and rehabilitation.

However, Nomura economists say such fiscal spending will be less effective as shutdowns and restrictions on movement around the country continue. Economists also expect little more fiscal spending from these new measures, as fiscal revenue and land sales are likely to fall sharply.

However, Iris Pang, chief economist at ING bank, said more fiscal stimulus is likely.

“Because Shanghai Still haven’t fully lifted the shutdown measures and Beijing tightened the distancing measures in some districts, we expect more fiscal stimulus possible as the government seems to want to avoid easing bad” – Pang said on May 24.

Earlier, on May 23, the People’s Bank of China and the Banking and Insurance Regulatory Commission of China, two of China’s top financial regulators, met to discuss the situation. currency and credit of the country.

They stressed that the financial system needs to “make full use of various policy instruments” to “support high-quality economic development with moderate credit growth”.

“We must balance the relationship between moderate credit growth and financial hedging, and improve the sustainability of financial support for the real economy,” the statement said.