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China Vows More Pro-Growth Policies as Banks Urged to Step Up

© Bloomberg. Buildings during a lockdown due to Covid-19 in Shanghai, China, on Tuesday, May 24, 2022. Shanghai has been officially easing a lockdown that kept its 25 million residents home-bound for nearly two months following a decline in Covid-19 cases, but an army of zealous grassroots volunteers who police housing compounds are still banning many people from going outside. Source: Qilai Shen/Bloomberg

(Bloomberg) — Beijing ratcheted up calls to boost China’s Covid-battered economy, with the nation’s finance minister saying more pro-growth policies are being studied and a newspaper affiliated with the Cabinet urging banks to step up lending for infrastructure projects.

The government will further accelerate fiscal spending as well as the sale of special local government bonds, Finance Minister Liu Kun said Tuesday during a meeting of the standing committee of the National People’s Congress, according to a report by the Xinhua news agency posted on the parliament’s website. Special local bonds are mainly used for financing infrastructure investment.

The authorities are studying new policy tools to support the economy, Xinhua cited Liu as saying in a separate report. They are also planning to front-load stimulus, accelerate the implementation of existing policies and enhance the adjustment of their macro policies as part of efforts to keep economic growth within a reasonable range, he said.

Liu made the comments to the NPC standing committee while reporting on the outcome of the 2021 central government budget. The legislators are meeting this week through Friday to review revisions to a slew of laws including the Anti-Monopoly Law, according to its agenda.

Separately, the Economic Daily, a newspaper affiliated with the State Council, said in a front-page commentary Wednesday that banks should step up funding support for infrastructure projects to help stabilize growth. A number of water conservation and rural road renovation projects unveiled recently by the State Council, China’s Cabinet, will require assistance from the financial system, it said.

Policy banks should make good use of the 800 billion yuan ($120 billion) loan quota granted by the State Council, and optimize their lending approval process along the principle of low profit margins in order to help projects start early, according to the article under the name Jin Guanping.

Large state-owned commercial lenders should provide medium to long-term credit support for indirect financing of the projects, and smaller banks should meet the funding demand of small firms in the upstream and downstream sectors relevant to the projects, it added.

China is hoping to ramp up infrastructure investment this year to offset a slump in the economy triggered by Covid outbreaks and lockdowns, an ongoing housing market, and weak consumer demand. President Xi Jinping promised an “all out” effort to boost infrastructure investment and local governments are accelerating sales of special bonds to fund the drive.

The economy had a mixed recovery last month, with production unexpectedly rebounding while consumer spending and the property market continued to shrink. 

©2022 Bloomberg L.P.

China Vows More Pro-Growth Policies as Banks Urged to Step Up

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