China must present on Saturday a new recovery plan eagerly awaited by analysts and investors who are counting on announcements worth several hundred billion dollars to support the world’s second largest economy, undermined in particular by a prolonged real estate crisis.
The world’s second largest economy has been trying since the lifting of restrictions linked to the COVID-19 pandemic in 2022 to revive its growth and activity.
However, it still faces multiple problems, including a prolonged debt crisis in the real estate sector, chronically weak consumption and high youth unemployment.
After sparse announcements in recent months with no apparent effect, analysts are urging the Chinese government to implement another “bazooka” recovery plan to stimulate its economy and restore confidence.
They hope that Beijing is finally resolved to practice “whatever it takes”, a reference to the principle which guided the former head of the European Central Bank (ECB) Mario Draghi, to save the euro zone during the crisis of the debt of the 2010s.
While few details have leaked ahead of Finance Minister Lan Fo’an’s press conference scheduled for 10 a.m. Saturday (10 p.m. EDT Friday), analysts and investors surveyed by Bloomberg are counting on 2 trillion yuan ($280 billion). dollars) of measurements.
Beijing has only indicated that the minister will present “a plan for counter-cyclical adjustment of fiscal policy aimed at promoting high-quality economic development.”
The Chinese government should announce on Saturday “2000 to 3000 billion yuan of very long-term government bond issues”, estimates Gary Ng, economist for Asia-Pacific at Natixis, to AFP, under penalty, says -it, to disappoint the markets again.
Real estate, consumption, infrastructure
The measures should concern “real estate, consumption and infrastructure,” adds the analyst.
“The Chinese authorities should send a positive signal to the markets, with radical budgetary measures to help the economy stabilize,” said Yue Su, analyst at the Economist Intelligence Unit. He expects up to 3 trillion yuan ($425 billion) in aid.
“The stakes are high, most observers agree on the fact that the recent stimulus announcements will not bring much, unless they are supported by budgetary measures,” estimates Julian Evans-Pritchard of Capital in a note. Economics.
“Three factors will be critical in determining the impact of the stimulus measures: their scale, the sectors they target and their speed,” he says.
At the end of September, the Chinese authorities already launched a first salvo of measures on a scale unprecedented in years, including rate reductions and more accessible property loans.
Interest rates on one-year loans to financial institutions have been reduced, as has the amount of cash lenders must hold, and authorities have pushed down rates on existing mortgages.
These measures caused the dung of Hong Kong and mainland China to soar by more than 20%, who began to hope that the authorities would manage to control the problems.
But investors expect more. They were extremely disappointed on Tuesday by a meeting of the country’s planning agency where no new stimulus measures were unveiled. As a result, the Chinese markets plunged on Wednesday (-6.62% in Shanghai and -8.65% in Shenzhen at the close).
The next day, the Chinese central bank announced the opening of a liquidity envelope of 500 billion yuan ($70 billion), which could be expanded, from which listed companies or insurance companies could draw to buy “high-quality liquid assets” such as Treasury bills or short-term central bank bonds.