Analysis
BEIJING – The State Council is increasing efforts to consolidate the economy’s recovery momentum with a flurry of more decisive supportive measures.
It announced on Wednesday 19 follow-up policies to shape greater synergy among the policies already in place. It issued a package of 33 measures in May, covering fiscal, financial, industrial and other fields.
Mainland China’s economy has continued the recovery momentum since June. However, the foundation of economic recovery is “not solid” due to negative factors, according to a State Council executive meeting chaired by Premier Li Keqiang on Wednesday.
Policymakers should take decisive measures and make good use of the “tools available in the toolbox” to maintain the appropriate policy scale, the meeting stressed.
The State Council – the nation’s chief administrative authority – has rolled out various measures to tilt more financial support for infrastructure and major projects.
Amid the infrastructure drive, the State Council pledged an addition of over 300 billion yuan in quotas for the policy-based and developmental financial instruments, based on 300 billion yuan of such quotas already in place.
Analysts believe that the fresh release of such financial support will boost spending by spurring effective investment and bolster loan demand.
Wen Bin, the chief economist at China Minsheng Bank, says he expects the 600 billion yuan of government-backed policy tools to mobilize 3 trillion yuan of funds.
The new measures also encompass efforts to further reduce actual borrowing costs.
Since the beginning of the year, the People’s Bank of China (PBOC) has leveraged its policy tool kit to consolidate economic growth. A new move in this regard came on Monday, as it announced to cut the prime loan rate, a market-based benchmark lending rate, by a large margin.
In a meeting held on the same day, the central bank stressed the importance of the steady expansion of loans. It called for efforts to provide better credit support for market entities and urged policy banks to make full use of the policy-based, developmental financial tools to increase support for infrastructure construction.
The State Council will dispatch task forces to several provincial-level regions with sizable economies to supervise their work and assist in stabilizing overall economic performance.
“With the government support, the foundation of recovery will likely consolidate, and the pace of growth will firm up in the next stage,” Wen said.
– Xinhua
