China’s politburo vows to spur growth, tech

CHINA’S top leaders promised to boost economic stimulus to spur growth and vowed to contain the country’s worst Covid outbreak since 2020, which is threatening official targets for this year.

“We should waste no time in planning more policy tools and enhance the strength of adjustment in due course,” the Communist Party’s Politburo said Friday, according to a readout of a meeting of the leadership on state broadcaster China Central Television.

Led by President Xi Jinping, the Politburo signalled its commitment to Covid Zero, a strategy that’s forced major cities like Shanghai to shut down, disrupted business operations and roiled global supply chains.

Xi earlier this week highlighted infrastructure as a big focus for the government as growth comes under pressure, a pledge reiterated by the leadership meeting today.

Authorities should “strengthen macro adjustments, strive to achieve full year economic and social development goals, and keep the economy running within a reasonable range,” it said. Leaders also vowed to guarantee “supply chains in key sectors” and smooth transport logistics, pledging to “positively respond” to demands from foreign-invested companies for a smoother business operating environment.

The midday timing of the statement was unusual, since Politburo readouts are typically made public late in the afternoon or during the CCTV’s flagship evening news programme. 

A lunchtime announcement gave markets an opportunity to react: The benchmark CSI 300 Index rose to its session high after trading resumed in the afternoon, gaining as much as 2.5 per cent. The offshore yuan reversed its earlier weakness to strengthen as much as 0.65 per cent at 6.6166 per dollar.

UBS Group AG economist Tao Wang said while the statement didn’t hold any “big surprise on the upside,” it wasn’t disappointing either. 

“It made clear on where policy support are needed,” she said. “Property, infrastructure and platform economy are highly concerned by the market, and they are also sectors that can have an multiplier effect to drive economic growth.” 

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The Politburo pledged to “strengthen infrastructure construction in an all-around way” and to support the housing market. While officials repeated the phrase that “houses are for living in not for speculation,” the government said it would also work to meet the demand for better quality housing and “optimize” the supervision on developers’ income from project pre-sales

There was also a small shift in language on Internet platform businesses, a sign of possible easing of a regulatory crackdown on the industry. China’s top economic official Liu He in March called on regulators to “steadily advance and complete as soon as possible the rectification of large platform companies”. The Politburo vowed to “complete the special rectification of the platform economy,” without giving a timeline but dropping the phrases “steadily advance” and “as soon as possible.”

The comments helped to drive the Hang Seng Tech Index up as much as 11 per cent.

Beijing has put difficult economic reforms - such as slowing debt growth and curbing income inequality - largely on hold this year as it focuses on growth ahead of a Communist Party Congress this fall, where Xi is expected to seek a historic third term as party chief. 

The government has set a growth target of about 5.5 per cent for the year, a goal that’s becoming difficult to reach amid a wave of coronavirus infections and Beijing’s strict adherence to its Covid Zero strategy. Economists forecast gross domestic product to grow just 4.9 per cent this year.

The Politburo gave no sign, though, that the country would back down from Covid Zero. 

“The contradiction now is they will stick to Zero Covid policy. That’s a big constraint,” said Chen Long, an economist at Beijing-based consultancy Plenum. Home sales, for example, did not rebound despite property restrictions being relaxed in many cities, he added.

Top leaders also nodded to the recent rout in financial markets. The Politburo said the government would steadily facilitate the reform of registration-based initial public offerings, actively introduce long-term investors and maintain the stable operation of capital markets.

Chinese officials have promised greater support for the economy in recent weeks. Before the Politburo statement, those pledges culminated in a call from Xi on Tuesday for an “all out” infrastructure commitment to bolster growth, including construction in fields such as transport, energy and water conservation.

“These are good words, the question is how they will deliver,” Chen said of the Politburo statement. “I think we need to see action in the next few weeks.” BLOOMBERG