China is doubling down on efforts to revive its faltering economy, as President Xi Jinping and the Politburo vow to stabilize the private sector and address the ongoing real estate crisis. During an unexpected Politburo meeting on September 26, 2024, Xi outlined plans aimed at saving the private economy, boosting stock markets, and halting the prolonged slump in the real estate sector. These moves signal Beijing’s intensified focus on averting further economic decline amid growing concerns over property developers' debts and overall market instability.
The Chinese leadership's new economic strategy comes at a critical time as the country grapples with the long-term effects of its stringent "zero-COVID" policies, which stunted growth, and the ongoing property crisis that has caused significant damage to market confidence. One of the key elements of Xi's plan involves prioritizing fiscal expenditures to keep enterprises afloat, a measure deemed vital for economic recovery. According to a Politburo readout, this effort includes mobilizing officials to ensure that the necessary policy support reaches key sectors in dire need of relief.
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The DF-41 is China's longest-range missile, capable of speeds of up to Mach 25 and designed to carry up to 10 nuclear warheads.
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— Rubi Yona ๐๐ฎ๐ฑ ืจืืื ืืื ื (@RubiYona) September 25, 2024
The real estate sector remains a focal point, with major developers like Evergrande and Country Garden facing massive debt restructuring challenges. Evergrande, in particular, saw its shares plummet by 79% in August 2024, following the resumption of trading after a 16-month halt. The company is burdened by over $326 billion in liabilities, making it one of the world’s largest corporate debt crises. Country Garden, another industry heavyweight, reported a staggering $6.7 billion loss in the first half of 2023, narrowly avoiding default on its U.S. dollar bond payments. Together, these crises underscore the severity of China’s property market collapse and its ripple effects on the broader economy.
Xi’s new initiatives aim to instill confidence in both the public and private sectors, calling on officials to be bold and innovative in their approach. "The vast number of party members and cadres must have the courage to take responsibility and dare to innovate," Xi emphasized, stressing the importance of government leadership in navigating the economic downturn. This call to action is particularly important for reviving private sector investment, which has lagged behind state-driven projects in recent years.
They tell us war is how the US keeps its economy afloat.
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— Syrian Girl ๐ธ๐พ (@Partisangirl) September 26, 2024
In addition to shoring up private enterprises, the Politburo has committed to addressing the real estate crisis by improving access to financing and reducing the debt burdens that have plagued developers for years. The property sector, which accounts for a substantial portion of urban household wealth and GDP, is seen as a critical pillar for economic stability. Policymakers hope that by stabilizing the housing market, they can avert further economic fallout and restore confidence among homebuyers and investors.
However, experts remain cautious, pointing out that previous efforts to rein in property developers' over-leveraging, such as the "Three Red Lines" policy, may have exacerbated the current crisis by cutting off crucial sources of funding.
International observers are closely watching China’s real estate market, concerned about its potential global impact. As the world’s second-largest economy, a prolonged downturn in China could trigger a broader slowdown, especially given the interconnectivity of global markets. Investors are particularly worried about the ripple effect that China's property slump could have on global financial systems, with some comparing the current situation to the 2008 U.S. housing crisis.
Despite these concerns, the Chinese government remains optimistic that its new round of stimulus measures, coupled with targeted fiscal interventions, will help stabilize the economy. Xi’s latest remarks signal an all-out effort to steer the country away from further economic turmoil and return it to a path of sustainable growth.
