New economic measures decision from China

The Chinese government is planning policies to stimulate growth in order to continue the recovery from the COVID-19 pandemic, in response to signs of a slowdown in the economy. According to Xinhua, the State Council, which acts as the cabinet in China, discussed the economic situation at a meeting. The meeting, chaired by Premier Li Jiang, noted that China’s economic recovery was affected by increasingly complex external conditions and the slowdown in global trade and investment, and that more effective measures were needed in the face of the changing landscape. The meeting emphasized the need to improve macroeconomic policies, effectively expand demand, strengthen the real economy, and prevent risks in key sectors. The meeting also discussed an action plan for enterprises in the technology sector and a draft regulation on the management and supervision of private investment funds. The report did not provide details on what concrete measures would be implemented to stimulate economic recovery. The People’s Bank of China (PBoC) had signaled that it would implement monetary expansion against the slowdown in the economy by lowering the 1-year policy rate from 2.75 percent to 2.65 percent. Following the messages at the State Council meeting, concrete measures for growth are expected to be announced in the near term. Signs of a slowdown in the economy The May data show that the Chinese economy is having difficulty maintaining the growth momentum it achieved in the first quarter of this year after the stagnation in the last quarter of last year. According to data published by the National Bureau of Statistics of China (NBC), industrial production increased by 3.5 percent on an annual basis in May, falling short of the 5.6 increase in April, while retail sales, which are considered a measure of consumption, increased by 12.7 percent, falling behind the 18.4 increase in April. Despite the low base caused by the lockdown and quarantine measures implemented due to the Covid-19 outbreak in the spring of last year, it was observed that production and consumption slowed down. On the other hand, the leading economic activity data announced by the NBC also pointed to a decline in both the manufacturing industry and non-manufacturing sectors in May. The manufacturing purchasing managers index (PMI) decreased by 0.4 points to 48.8, while the non-manufacturing PMI decreased by 1.9 points to 54.5. In May, exports decreased by 7.5 percent and imports by 4.5 percent compared to the same period last year, while unemployment among the youth population aged 6-24 rose to a record high of 20.8. The Chinese economy grew by 3 percent in 2022, its lowest annual income increase since 1976, following the 2.2 percent growth in 2020, when the first effects of the COVID-19 pandemic were felt. The economy grew by 4.5 percent in the first quarter of this year, exceeding expectations. The Chinese government had announced a growth target of "around 5 percent" for this year at the National People's Congress held in March.