China's leaders acknowledged that the central bank's investment stimulus measures this week were likely to be insufficient and vowed to stem the housing market slump and boost growth.
China's Politburo pledged the state would make “necessary expenditures” to meet this year's economic growth target of 5 percent, boosting transfers to the poorest and giving local authorities the funds and powers to intervene to prevent further falls in housing prices.
According to Reuters, families with two or more children will receive 800 yuan (85 pounds) a month for each child, excluding the first-born. Local governments will be supported by the state to borrow up to an additional 213 billion pounds, allowing them to intervene in the property market, such as by buying up vacant properties.
Meanwhile, China is reportedly considering injecting up to 1 trillion yuan into the country's largest state-owned banks to boost their lending capacity.
China's economic growth has been fueled by a surge in housing development and rising property values that support consumer spending. A housing glut in recent years has caused prices to plummet in many cities and pushed household wealth into negative territory.
Some of China's biggest property developers in the world's second-largest economy have gone bankrupt or are plagued by huge debts.
The planned intervention, announced after a monthly meeting of China's Communist Party officials, marks a shift from earlier piecemeal policies and marks an acknowledgement by Chinese President Xi Jinping that the struggling economy needs a more coordinated program of action backed by a bigger subsidy package.
“New situations and problems” required “responsibility and urgency”, state media reported, citing the Politburo meeting.
A range of economic data has fallen short of official forecasts in recent months, raising concerns that the growth target is at risk and that reliance on a combination of rising domestic property prices and exports is constraining growth. The 5% growth target is relatively modest by historical standards.
The People's Bank of China this week slashed interest rates and eased lending rules for domestic banks in its boldest economic stimulus measures since the pandemic.
The People's Bank of China cut interest rates on existing mortgages by half a percentage point and supported new lending by reducing the level of reserves that banks must set aside before making loans.
Chinese property stocks surged more than 8% after the Politburo's announcement, and among Hong Kong-registered companies they rose 9%. The yuan and Chinese government bond yields also rose.
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The Politburo said the government should “promote real estate market stabilization” by expanding the list of approved housing projects that can access further loans and revitalizing idle land, the official news agency reported.
“In response to people's concerns, we will adjust home purchase restriction policies, lower existing mortgage interest rates, improve land, fiscal, tax and monetary policies as soon as possible, and promote new models of property development,” authorities said.
Bruce Pan, chief China economist at real estate services firm Jones Lang LaSalle, said the Politburo's approval of the additional stimulus measures “represents a strategic shift in macro policy from piecemeal policies to a highly coordinated package moving in the right direction.”
“Increased government spending will be enough to spur an upturn in business confidence, market sentiment and economic activity, helping China catch up with underlying growth trends,” he added.
Xi is believed to be facing criticism from his economic advisers, including Zhu Hengpeng, a member of a government-funded think tank who has reportedly gone missing.
