China needs a more “flexible” monetary policy and a more “forceful” fiscal policy to stop the economy’s slowdown and spur growth, Chinese leaders said at the government’s Central Economic Work Conference Monday, according to the official Xinhua News Agency.
These strategies included widening the fiscal deficit and stimulating the housing market, as well as structural reforms to rein in China’s increasing reliance on credit.
At the gathering, President Xi Jinping has said the nation must meet a minimum annual growth target of 6.5%
“They have a challenge to restore their own credibility, and to that end we’ll see concerted easing efforts in order to try to turn the economy around, at least in the short term,” Mark Williams, the chief Asia economist at Capital Economics Ltd. in London told Bloomberg. “It’s clear that policy in a broad sense is still being eased, and it’s reasonable to expect looser fiscal policy next year and also looser monetary policy.”
The government said it would promote “consolidation of property developers” and encourage them to change marketing strategies, Xinhua reported. Outdated restrictions on home ownership will be removed, according to the report. Officials also pledged assistance for rural residents seeking to buy homes in urban areas and encouraged cheaper residential prices, which would help shrink a glut of unsold properties.
In their forecast for 2016, Communist Party officials said they would boost supply-side reforms such as dealing with overcapacity, according to Xinhua.
Additional Central Economic Work Conference pledges, as outlined by Xinhua reports:
- Further steps to “guard against and defuse financial risks” in 2016, and to effectively defuse local-government debt risks.
- Promote “mass entrepreneurship and innovation” and continue to implement an innovation-driven strategy.
- Reduce poverty by establishing a detailed register of the poor population and offering tailored assistance.
- Offer more support for companies to upgrade technology and equipment, and reduce debt with “innovative financial policies.”
- Beef up agricultural production to ensure food security and stable income growth for farmers by modernizing infrastructure and technology to boost capability and quality.
The summer stock market rout, weaker-than-forecast economic data and rising capital outflows in the wake of the August currency devaluation, have strengthened the need for additional stimulus. Inflation data for November showed there’s scope for looser monetary policy, with consumer prices rising about half the government’s targeted pace and producer prices falling for a record 45th straight month, according to Bloomberg.