The top-level meeting on the Chinese economy, presided over by General Secretary Xi Jinping, has received positive responses from both Chinese and overseas markets. The meeting addressed various challenges facing the Chinese economy and pledged efforts to ensure reasonable economic growth, instilling confidence in the growth prospects of the world’s second-largest economy despite downward pressure.
Before the meeting, some foreign media outlets propagated negative views regarding the Chinese economy’s slowdown pressures. However, on Tuesday, market confidence significantly improved as stock prices surged, northbound capital inflows increased, and overall market performance indicated renewed investor confidence.
Chinese mainland’s stock market witnessed a surge of over 2 percent in all three major indexes, with over 4,200 stocks making gains. Foreign capital was buoyed as well, with net inflow of “northbound capital” reaching a new high for the year. The offshore yuan strengthened against the US dollar.
The recent meeting has set the tone for economic work in the second half of the year, leading to significantly improved economic expectations for China in the latter part of 2023. While some foreign media highlighted the absence of a large-scale stimulus plan and specific details, Chinese officials emphasized the importance of improving the quality of economic development rather than solely focusing on speed.
Experts believe that China has ample policy tools to ensure both speed and quality. The meeting indicated the possibility of implementing monetary easing measures in the second half of the year, including a policy rate cut in the third quarter and a potential lowering of the reserve requirement ratio (RRR) in August and September.
Policies discussed during the meeting, particularly in areas such as the capital market, property market, and job market, surpassed market expectations. The meeting emphasized the need to boost the capital market and restore investor confidence, signaling potential measures to stabilize foreign investment and attract more foreign capital.
Notably, the phrase “housing is for living in, not for speculation” was absent from the meeting announcement, suggesting a potential easing of real estate policies in the second half. The meeting also stressed the importance of stabilizing employment at a strategic level, reflecting a high-level priority in ensuring stable employment.
With improved expectations, policy adjustments, and more measures to be rolled out in the second half of the year, China is expected to achieve annual growth of around 5.5 percent for 2023.