(Bloomberg) — China’s regulators vowed to step up efforts to stabilize housing and stock markets and implement more effective fiscal policy, in the wake of a meeting of top leaders calling for bigger stimulus.
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The government will promote the recovery of the real estate market through measures such as increasing demand and controlling the supply of land for new construction development, China News Service reported, citing Dong Jianguo, a vice minister at the Ministry of Housing. He spoke at a conference on Saturday.
The China Securities Regulatory Commission said it will improve market monitoring for futures and spot trading, and strengthen supervision of margin trading, derivatives and quantitative trading, according to a statement on its website.
The Finance Ministry said it will pursue more effective and sustainable fiscal policies and improve macroeconomic regulation next year. The government will also increase the issuance and use of local governments’ special bonds and expand their investment areas, according to a statement on its website.
The comments come after officials led by President Xi Jinping vowed to raise the budget deficit target next year after a two-day meeting of the Central Economic Work Conference in Beijing. For only the second time in at least a decade, they made “boldly ramping up consumption” and boosting overall domestic demand their top priority.
China’s struggling economy has recovered modestly in recent weeks on more government support, with signs of improvement in consumption and factory activity. But overall confidence remains weak because policies have not been strong enough to free the economy from deflation.
In a sign of the challenges facing policymakers, China’s credit expansion unexpectedly slowed in November, data showed on Friday. Loans to the real economy, excluding loans to financial institutions, fell to the lowest level for November since 2009. This offset high government bond issuance, dampening overall credit growth.
More relaxations are in the pipeline. China will cut interest rates and reserve requirements in a timely manner next year, the 21st Century Business Herald reported on Saturday, citing Wang Xin, director of the People’s Bank of China research bureau.
The central bank will increase the intensity of money and credit supply, Wang said at an event on Saturday, the report said. Financing conditions for the real economy will also be further relaxed, Wang said. The comments came days after the Politburo pledged to embrace “moderately accommodative” monetary policy by 2025.
The prospect of further easing leads to a flow of money into government bonds. On Friday, yields on Chinese 10-year bonds fell to a record low of 1.77%, while longer-term yields also plummeted. In contrast, the CSI 300 stock index fell 2.4%, its worst decline in three weeks.
The central bank will also improve the way it manages exchange rate expectations and protects against possible shocks, according to a senior official.
The PBOC will “intensify exchange rate expectations management and respond strongly to external shocks,” monetary policy department head Zou Lan told state media in an interview published Friday. In addition, the central bank will “resolutely prevent the risk of exchange rate overshoot.”
The yuan has fallen sharply since mid-October and fell on Thursday after a media report showed authorities were considering allowing the yuan to depreciate in response to the threat of a trade war with the US.
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