China is investing $ 28 billion in local government governments
China is investing $ 28 billion in local government governments
For this year,china has planned 200 billion yuan ($ 28 billion) for investment projects of local governments in order to achieve its ambitious economic growth targets. The National Development and Reform Commission (NDRC) made this announcement at a press conference on Tuesday and disappointed investors who had hoped for a significantly larger stimulus package.
economic growth goals and challenges
"We are confident that we can achieve the annual economic and social development goals and tasks and maintain sustainable, stable and healthy economic and social development," said Zheng Shanjie, the chairman of the Commission, to the journalists in Beijing. China had announced a growth goal of 5 % in March, but a number of weak economic data in summer caused concern among economists that this goal could possibly be missed. The second largest economy in the world is strongly struck and suffers from a Real estate crisis Sinking editions and Hoher youth unemployment , to name just.
support measures for local governments
reactions of the financial markets
"The NDRC has broadcast a clear message today that the decision -makers will continue to take a growth -oriented attitude. Nevertheless, investors were disappointed with the lack of details on new fiscal measures," said Fred Neumann, chief economist for Asia at HSBC. "Fiscal relaxation is urgently needed to accelerate growth sustainably. This is probably expected later this month."
The measures announced last week largely focused on monetary policy, which typically includes decisions from central banks to influence the credit costs and control inflation. Fiscal measures, on the other hand, can include the use of taxation or other means to directly influence public expenses. The lack of a "Bazooka" announcement on Tuesday was negative of the opportunities for the markets in Hong Kong and mainland china. The Blue-Chip shares on the stock exchanges of Shanghai and Shenzhen increased by 6 % after they had over 9 % at the beginning of the trade, the Hang Seng Index, which had just experienced the best two weeks since at least 2005, lost more than 5 %.
outlook and further steps
Many economists believe that much more needs to be done to regain the trust of consumers so that they are ready to spend money again. Jia Kang, former director of a think tanks associated with the Ministry of Finance, told the state newspaper The Paper last week that Beijing should spend up to 10 trillion yuan ($ 1.4 trillion) in the form of long-term government bonds to finance investments in infrastructure and public work. He described this amount as "not inappropriate" because Beijing had taken similar stimulus measures in the past.
"We agree with leading political consultants like ... Jia Kang that a volume of over 10 trillion or 10 % of GDP could be necessary to enliven the economy if you look at the history of China in terms of stimulus", wrote economists from Citi in a research note on Friday.
On September 24, the Volksbank from China announced a reduction in one of its main interest and reduced the amount of cash that banks have to keep as a reserve. Reductions of the existing mortgage interest were announced, and the minimum deposit for second buyers was reduced from 25 % to 15 % to support the struck real estate sector. In addition, promises were made to support the stock market.
The next day, the officials maintained optimism by announcing rare cash donations for disadvantaged citizens and promising subsidies for graduates who have difficulty finding a job. And later this week, the ruling political party of the Governing Communist Party-an important decision body-continued optimistic communication. In a break with the tradition, XI devoted the group to the group of September.High -ranking civil servants admitted that "new situations and problems" have arisen in the economy and demanded urgent measures to increase fiscal expenses, to stop the decline in the real estate market and to improve the employment opportunities for freshly baked graduates and hiking workers.
Report by CNNS Marc Stewart.
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