China Signals Little Appetite for Major Stimulus Despite Growth Headwinds

The ruling Communist Party’s Politburo, China’s top decision-making body, emphasized on Thursday the need to full use of existing policies, suggesting that no big-bang easing is in the pipeline.

Still, the leadership pledged to strengthen countercyclical adjustments and introduce pragmatic, effective additional policies when appropriate, according to an official readout published by state-run Xinhua News Agency. No timeline was given.

Officials at the quarterly meeting also vowed to accelerate fiscal spending and the use of bond proceeds, while stepping up efforts to expand domestic demand and optimize supply.

However, Thursday’s statement included no changes to the fiscal budget or bond issuance schedule, said Zhiwei Zhang, chief economist at Pinpoint Asset Management.

While officials discussed boosting domestic demand, the emphasis appeared to be on improving the supply of goods and services rather than boosting income growth, Zhang added.

“The government emphasized the importance of promoting more balanced trade relations,” Zhang noted. “This is probably in response to the pressure from trading partners such as Europe.”

Chinese leaders also pledged to pursue breakthroughs in cutting-edge technologies, support future industries and foster emerging sectors that could become pillars of the economy.

Authorities reiterated promises to curb cutthroat competition among businesses and to stabilize the real-estate market. They also pledged continued support for employment, efforts to resolve debt issues, reform and risk mitigation at smaller financial institutions, and deeper capital-market reforms.

The absence of major stimulus was widely expected despite slowing domestic growth, partly because the official annual growth target was lowered to around 4.5%-5% this year. China recorded its weakest economic expansion in more than three years in the second quarter, despite an artificial-intelligence-driven surge in exports.

“China’s growth strategy—both short- and medium-term—puts technology and advanced manufacturing ahead of reviving domestic demand,” economists at Pantheon Macroeconomics said in a note this week.

The Chinese Communist Party will convene a plenum on party governance in October, signaling continued efforts to root out corruption.

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