China said on Tuesday it was “confident” it would meet its growth target this year but delayed announcing more stimulus, leaving markets disappointed.
Beijing has struggled to revive business activity as officials target growth of around five percent, which analysts say is optimistic given numerous headwinds, from a prolonged housing crisis to sluggish consumption and local government debt.
All eyes were on Tuesday at a press conference led by Zheng Shanjie, head of China’s National Development and Reform Commission (NDRC), and investors hoped Beijing would unveil more economy-boosting policies.
But Zheng and his colleagues refrained from introducing new stimulus measures, instead reiterating that “the fundamentals of our country’s economic development have not changed.”
“We have full confidence in achieving the economic and social development goals for this year,” the top economic planner said.
“We are also confident that we can maintain stable, healthy and sustainable development,” he added.
Markets in mainland China were up 10 percent at the open as traders resumed their blistering rally after a week’s pause on hopes of more action from Beijing.
But these gains were offset as the press conference progressed with little concrete detail and Shanghai ended the morning just 4.8 percent higher, while Shenzhen added 7.7 percent. Hong Kong plummeted by more than five percent.
Investors had flocked back into stocks on the mainland and in Hong Kong since authorities began announcing a series of stimulus measures to reverse a long period of tepid economic growth.
Many of the measures unveiled so far target the weak housing market, long a key driver of growth but now mired in a protracted debt crisis, illustrated by the fate of developers like Evergrande.
To that end, Beijing’s central bank has cut interest rates on one-year loans to financial institutions, lowered the amount of cash lenders must keep on hand and lowered interest rates on existing mortgages.
“With the continued introduction of various policy measures, especially incremental packages, market expectations have improved significantly recently,” Zheng said on Tuesday.
Several cities – including the financial melting pots of Shanghai, Guangzhou and Shenzhen – have also further relaxed restrictions on home buying.
Analysts hoped officials would unveil further fiscal support measures, such as trillions of yuan in bond issuance and policies to boost consumption.
They warn that deep reforms to the economic system to ease the real estate debt crisis and stimulate domestic demand are needed if Beijing is serious about solving fundamental obstacles to growth.
“China’s economy is not in crisis and (Beijing) does not need to announce a major budget package for the rest of 2024 to help China meet its GDP target,” said Shehzad Qazi of China Beige Book.
“The real question is whether Beijing will announce a multi-phase spending program for 2025 and beyond that will also address the structural issues holding back the economy’s transition to a consumption-driven economy,” he added.
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