China’s state planner proposes further measures to stimulate the economy, but no new plans for major stimulus measures

Zheng Shanjie, chairman of China’s National Development and Reform Commission, pledged a series of measures to strengthen the country’s economy during a much-anticipated press conference on Tuesday.

But he stopped short of announcing new major stimulus plans, disappointing investors and weakening the rally in mainland Chinese markets.

China will accelerate issuance of special bonds to local governments to support regional economic growth, the senior NDRC official said.

Zheng said that ultra-long special government bonds, worth a total of 1 trillion yuan, have been fully deployed to finance local projects, and he promised that China will continue to issue ultra-long special government bonds next year.

The central government will release a 100 billion yuan investment plan for next year by the end of this month, ahead of schedule, a senior official added.

The head of the NDRC spoke at a news conference with four other key officials from the country’s economic planning agency. The briefing came as the markets were coming in Mainland China was returning from Golden Week, a week-long holiday that started on September 30.

The rally in the Chinese market lost steam as policymakers refrained from implementing more stimulus measures. The CSI 300 blue chip index pared gains to a 5% rise after rising more than 10% at opening. The Shanghai Composite Index and the SZSE Component Index also pared gains to around 5% and 8% respectively.

China is “confident” it will achieve its full-year economic growth target this year, Zheng said, pledging some measures to support the real estate market and boost domestic spending.

“The lack of specific figures may not be a negative sign,” Yue Su, chief economist at the Economist Intelligence Unit, said in a note. China’s “pro-growth policy stance remains unchanged.”

The economist kept her growth forecast for China unchanged at 4.7% this year and 4.8% in 2025, while anticipating that Beijing could arrange another 1 trillion to 3 trillion yuan in additional budget support to stimulate the real economy.

“Many Western investors will take profits off the table today and wait to see if more money comes in,” Shaun Rein, partner and managing director at China Market Research Group, told CNBC. They received “too much fuss because they were hoping the government would launch a huge stimulus package.”

“If fiscal stimulus doesn’t come with real meat and details, the rally will fade,” he added.

Last month, China’s top leaders signaled a sense of urgency in tackling a long and painful economic downturn that has cast doubt on the country’s ability to meet its annual growth target of “around 5%.”

Before the holiday, Chinese authorities had called for strengthening fiscal and monetary policy support at a monthly meeting of top Communist Party officials, unveiling a series of stimulus measures aimed at halting falling real estate prices.

The stimulus blitz came as growth in the world’s second-largest economy had slowed after a disappointing recovery from Covid-19 lockdowns, pressured by subdued domestic demand and a prolonged property downturn.

In the first half of the year Chinese economy grew by 5.0% compared to a year earlier, meeting the central government’s target, while GDP growth in the April-June quarter exceeded expectations and grew by 4.7%, marking the slowest growth since the first quarter of 2023 .

China’s latest consumer price index rose 0.6% year-on-year in August, above expectations of 0.7%, while the core CPI, which excludes food and energy prices, rose 0.3%, a slower increase for the second month in a row.

Amid a barrage of disappointing economic data, Chinese factory activity also contracted for the fifth month in a row in September, with the official PMI reaching 49.8 in September. A PMI reading above 50 indicates expansion in activity, while a reading below that level indicates contraction.

The Caixin PMI was 49.3 in the same period, the sharpest contraction in fourteen months, driven by declining demand and a weakening labor market.

In March, Zheng said at a high-level press conference that China will “continue to strengthen macroeconomic policies.” It would entail coordination of fiscal, monetary, employment, industrial and regional policies, he said, as China continues to step up macroeconomic policy adjustments.

The NDRC chief also acknowledged that “there are still many difficulties and problems” in achieving the country’s projected growth targets, according to CNBC’s translation of his remarks in Mandarin.

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