China’s Politburo meeting sends positive vibes to investors after Third Plenum disappoints

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Stocks surge, and investment banks like Nomura and Goldman Sachs hail pro-growth Politburo meeting

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A pedestrian rides an escalator in Pudong’s Lujiazui Financial District in Shanghai, China, on Monday, Jan. 29, 2024. Photo: Bloomberg

Zhang Shidongin Shanghai

Published: 8:30am, 1 Aug 2024

A Politburo meeting this week, chaired by President Xi Jinping, concluded that economic headwinds in China were reining in growth, an admission that drew loud cheers from investors who are now confident authorities will roll out forceful supportive measures in the world’s second-largest economy.

Xi and his 23 colleagues in the Chinese Communist Party’s highest decision-making Politburo acknowledged that the country would need to do more to achieve the growth target of around 5 per cent this year. They pledged to deploy “countercyclical measures” - the first reference to the term by the Party’s elite in a year - as well as adopt more proactive fiscal and monetary policies and spur household consumption.

“Compared with recent top-level economic policy meetings, Beijing acknowledged mixed economic performances and pledged to strengthen countercyclical policy actions, implying they will do more to support growth in the second half,” said Lu Ting, chief China economist at Nomura Holdings in Hong Kong.

Investors turned their attention to the Politburo meeting after the Party’s third plenary session, which concluded in mid-July, disappointed the market as it provided well-telegraphed, long-term development plans. The clamour for more supportive policies has been growing since stocks on the mainland and Hong Kong resumed their downtrend after a lingering housing crisis and weak consumer spending pressured growth in the second quarter.

The Communist Party’s Politburo typically reviews the economic situation and policies at its April, July and December meetings every year. The July meeting sets the policy tone for the second half, while the December gathering prepares the policy framework for the following year.

The market cheered the readout of the July Politburo meeting. The CSI 300 Index of onshore stock rose 2.1 per cent on Wednesday, halting a two-day decline, and the Hang Seng Index rallied more than 2 per cent.