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China’s government has pledged to increase fiscal support for the country’s economy, sparking optimism in the markets for further intervention following recent monetary stimulus measures by the central bank.
The politburo, led by President Xi Jinping, announced plans on Thursday to utilize government bonds to enhance the role of government investment, as concerns grow that China may fall short of its economic growth target for the year.
Details on the scale of the proposed fiscal stimulus were not provided in state media reports, but analysts anticipate additional measures to be implemented in the coming months.
The announcement resulted in a positive response from the markets, with China’s CSI 300 stock benchmark and the Hang Seng Mainland Properties index experiencing significant gains.
While the government has taken steps to support various sectors, including interest rate cuts and funds to stabilize the stock market, it has refrained from announcing a large-scale fiscal stimulus similar to previous crises.
Economists suggest that a substantial injection of funds into households may be necessary to revive the economy amidst challenges such as a property slump and declining domestic consumption.
The politburo meeting also emphasized the importance of supporting property developers, promoting consumption, increasing salaries, and encouraging foreign investment in manufacturing.
Additional reporting by Rafe Uddin in London