Premier Li Qiang called on China to explore and introduce incremental policies that are “tangible, effective and accessible to both the public and businesses”, as increasing external headwinds and prolonged weak domestic demand are creating challenges to the annual economic growth target.
Analysts said Beijing was likely to opt for an expanding fiscal policy for the rest of the year to boost consumption, predominantly by making full use of its treasury bonds.
“We must expedite implementation of existing policies, explore and introduce new, incremental measures that are tangible, effective and accessible to both the public and businesses,” the premier told an executive meeting of China’s State Council on Wednesday that discussed the economic work plan for the second half of the year.
Li also urged greater macro support, stabilisation of market expectations, boosting market confidence and nurturing future industries.
Beijing is seeking to address China’s thorny economic issues following weakening growth momentum in the second quarter, which was largely created due to sluggish domestic demand.
While exports and the industrial sector have been the bright spots for growth this year, escalating trade frictions are posing a risk of cooling down the growth engines, increasing the need for Beijing to boost domestic demand.
“Since its introduction, the plan has not been well implemented in sectors other than automotive, due to the lack of effective financial support from the central government.”
We are seeing signs of greater flexibility and versatility in the use of treasury bonds
“We believe that the effects of the policy will continue to emerge,” said Yuan Da, deputy secretary general of the National Development and Reform Commission on Thursday.
China would “put consumption promotion in a more prominent position”, added the official with China’s top economic planner.
Yuan said that the government would use economic system reform as an engine to launch a number of measures that are “ripe and palpable”.
Ding from Standard Chartered said fiscal measures in the first half of the year were tight, with the inflexible use of treasury bonds failing to effectively reach consumers, which led to many local governments being unable to spend allocated funds.
“We are seeing signs of greater flexibility and versatility in the use of treasury bonds, this could provide effective support in reversing low market expectations if local governments can fully use their budget,” added Ding.
