China's Politburo turns to 'tried and tested' playbook to spur growth through investment, property
Leadership meeting points to subtle shift in priority from reform to growth amid signs that the economy is slowing, commentary says
Beijing will turn to tried and trusted ways to stabilise the country's slowing economy - by boosting investment and stimulating the property market, according to the ruling Communist Party's top leadership.
In a statement after a meeting on Thursday, the Politburo, which sets national policy, stressed the need to strike a fine balance between the competing needs of "stabilising growth, promoting reforms, adjusting structure, benefiting people's livelihood and preventing risk".
A "long-term mechanism" to ensure healthy development of the property sector would also be established, the Politburo said.
The phrasing toed official lines adopted since last year, but commentaries carried by party mouthpiece said there would be a subtle change of focus from economic restructuring to growth stabilisation.
The statement came after a slew of disappointing economic data. Gross domestic product grew at 7 per cent in the first quarter, the slowest growth rate in six years, generating fears that the world's second-largest economy was losing momentum.
The commentary, released last night on its WeChat account, said the Politburo statement suggested the top economic priority would be growth, and policymakers were "likely to resort to old means", including stimulating the property market and boosting fixed-asset investment, to change economic gears.
According to the commentary, it all means that China will continue to issue tax and lending policies to encourage home purchases to stimulate demand for the oversupplied property market and to encourage developers to invest.
Property investment is about a quarter of the mainland's fixed-asset investment, and fixed-asset investment contributes to nearly half of national GDP.
"The top choice for stabilising the economy will be boosting investment," the commentary said.
Monetary policy is also expected to be loosened further if needed, with the Politburo pledging to make sure that funds and investment were channeled to the neediest sectors, including infrastructure and some industrial projects.
"We must solve the bottlenecks that stop the smooth circulation of funds" needed for major projects, the Politburo said.
One of those bottlenecks was banks, with lenders reluctant to extend major loans for fear of default. "One solution to the financing problem is to press banks to extend loans, which may not work well," the article said. "Another option is to activate the stock market and let more companies list."
The Shanghai Composite Index rose 16 per cent in the first quarter after adding 58 per cent in the second half of last year.
Tsinghua University researcher Yuan Gangming said the government would continue to support the stock market in the months ahead because it helped cut funding reliance on bank lending.
But a senior researcher with a government think tank, who asked not be named, was more cautious.
"China's capital market is still immature. Money may largely stay within the market [rather than flowing into the real economy]", he said. Bank lending appeared "more effective" in supporting the economy, he added.
The Politburo also reaffirmed the direction of state-sector economic reforms, while seeking to quell concerns that it may hurt private companies' interests, saying their legal property rights would be protected.
The leaders also said there were no changes to policies on foreign investment and opening up of the economy.
The comments came after central bank data indicated that net capital outflows rose in March.
