China’s Politburo vows to support economy, boost markets
Recasts, adds analyst comment, details
BEIJING, April 29 (Reuters) – China will step up its policy support for the economy, including its struggling internet platforms, as the nationwide outbreaks of COVID-19 and the war in ukraine raise risks, a top decision-making body of the ruling Communist Party said on Friday, lifting markets.
Beijing has set an economic growth target of 5.5% this year, which private economists say will be difficult to achieve without significant stimulus, as locks and other heavy battle brakes the pandemic wreak havoc on supply chains.
During Friday’s meeting chaired by President Xi Jinping, the political office said he would support industries and small businesses affected by COVID, accelerate building infrastructure and stabilizing transportation, logistics and supply chains, according to a report by the state– heads the Xinhua news agency.
Chinese stock prices surged, especially internet stocks battered by a repress last year, such as the Politburo’s commitment to “promote the healthy development of the platform economy” heightened hopes that the worst is over for the sector.
A A person with knowledge of the matter said China is due to hold a symposium with the country’s internet majors early next month.
COVID-19 and events in Ukraine have reinforced headwinds for the economy in what is a crucial year for China and for Xi, who is set to secure an unprecedented third term in the fall.
“The stabilization of growth, employment and prices is facing new challenges. It is very important to do a good job in economic work and to effectively protect and improve people’s livelihoods,” reported Xinhua according to the Politburo.
Analysts say more stimulus and some easing of housing restrictions will be needed if the government is to meet its growth target of around 5.5% for 2022.
“While these messages are positive, the key concerns specific policies and their implementation,” said Zhiwei Bhang,
Chairman and Chief Economist at Pinpoint Asset Management.
“The economy is struggling, with second-quarter GDP growth likely turning negative (year-on-year). A significant shift in macroeconomic policy is needed to turn the economy around,” he said.
Ting Lu, chief economist for China at Nomura, said he still expects the economy to grow 1.8% in the second quarter and 3.9% in 2022.
THE COVID QUAKE
Financial markets have been hard hit over the past two weeks by fears that the closures will cause serious damage to Chinese economy and derail a global recovery just as many countries are recovering from a pandemic-induced recession.
The Chinese reference stock index jumped more than 2% on Friday, with technologySTAR50 index biased up almost 5%. Shares of Hong Kong-listed tech companies rose, with the Hang Seng Tech Index .HSTECH up 10%.
On Tuesday, Xi chaired a meeting that announced a big infrastructure push to boost demand, reinforcing Beijing’s reliance on expensive projects to spur growth.
“We need to speed up policy implementation, implement tax refunds, tax and fee reductions and other policies, and make good use of all kinds of monetary policy tools,” he said. Xinhua told Friday’s meeting.
Beijing will also support “healthy” development of the real estate market, including improved oversight of pre-sale escrow funds, stoking analysts’ expectations that some cities will loosen oversight of these funds to help ease a cash crunch for developers.
Still, the Politburo said authorities would continue to implement the controversial dynamic zero COVID policy to control outbreaks while minimize the the impact of the pandemic on the economy.
(Reporting by Kevin Yao and Beijing Newsroom; Editing by Shri Navaratnam, Stephen Coates and John Stonestreet)
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