Beijing has announced new measures to boost China’s sluggish economy amid decreasing domestic demand and rising tariffs on exports. However, the market performance following a recent press conference held by its top economic body was disappointing.
China’s National Development and Reform Commission (NDRC) held a press conference on Oct. 8 to promote its “comprehensive implementation of incremental policies.”
On that day, the Hong Kong stock market plunged more than 2,300 points, and the mainland stock markets opened high but quickly lost momentum.
The World Bank also predicted that China’s economic growth would slow from 4.8 percent in 2024 to 4.3 percent in 2025, adding extra pressure to the East Asian region.
The NDRC’s press conference appeared to have been well orchestrated. On Sept. 26, the Politburo of the Chinese Communist Party (CCP) convened to discuss the current economic situation and the next steps for economic work, resulting in a series of incremental policies. Then, on Sept. 29, China’s cabinet, the State Council, held a meeting to focus on implementing these policies. The NDRC even announced this press conference two days in advance. Five of its top officials were in attendance, raising expectations for significant new stimulus measures.
However, what was actually presented was disappointing.
The so-called incremental policies lacked clarity. The officials announced that most of the 6 trillion yuan ($843 billion) of state investment had already been allocated to specific projects. However, they did not respond to a Reuters reporter’s questions about the scale and objectives of the stimulus package. Furthermore, the Chinese officials vaguely expressed “full confidence” in meeting this year’s economic growth target of 5 percent.
The Sept. 26 Politburo meeting did not lead to any significant economic decisions. The authorities still lack a clear direction and effective solutions to China’s economic issues. They seem hesitant and uncertain, having only developed measures to tackle immediate problems.
China’s central bank, the People’s Bank of China, announced several significant policies on Sept. 24. This raised expectations for a large-scale stimulus similar to the 4 trillion yuan ($566 billion) package introduced in 2008. However, these expectations were not met, further worsening the outlook for China’s economy.
So why hasn’t the CCP initiated a large-scale economic stimulus plan?
I believe there are three main reasons.
First, the authorities are deeply concerned about the economic downturn and are even more apprehensive because they lack clarity on how severe it may become.
In the foreseeable future, China’s external economic environment will become increasingly challenging. For example, Republican presidential nominee and former U.S. President Donald Trump said that if he is reelected in November, he will consider imposing tariffs on China again, possibly exceeding 60 percent. Beijing must consider how to respond if this happens, so it is likely preparing for that possibility by safeguarding some of its financial strength.
Second, China’s current economic challenges are significantly greater than those of 2008, making it much more difficult for the CCP to provide support, even if it wanted to.
- In 2008, China’s GDP was about 30 trillion yuan ($4.2 trillion), and by 2023, it had grown to 126 trillion yuan ($17.8 trillion), making the CCP’s efforts to rescue its economy much more difficult.
- In 2008, M2 (a broad measure of money supply) was 47.5 trillion yuan ($6.7 trillion); by the end of 2023, it had reached nearly 300 trillion yuan ($42 trillion), leaving little room for further monetary expansion.
- In 2008, household debt was less than 18 percent; by June 2024, it had risen to 62.6 percent.
- By the end of 2008, local government debt was around 5 trillion yuan ($707.6 billion), and the balance was roughly maintained; by 2023, the outstanding explicit debt of local governments stood at 40.74 trillion yuan ($5.7 trillion), with a total of 9.34 trillion yuan ($1.3 trillion) in local government bonds issued throughout the year.
- By the end of 2008, China’s national debt stood at about 5.33 trillion yuan ($754 billion), with about 854.9 billion yuan ($121 billion) issued that year; by the end of 2023, the national debt had risen to 30.03 trillion yuan ($4.2 trillion), with a total issuance of 11.14 trillion yuan ($1.57 trillion) for that year.
Since the CCP’s 20th National Congress in 2022, the State Council’s new members, including Premier Li Qiang, have had a limited role at the top level. In addition, CCP leader Xi Jinping’s consolidation of power has further weakened the State Council’s authority.
Furthermore, after Xi gained absolute power at the 20th National Congress, his cronies—who had developed personal relationships with the CCP leader from his previous positions in Fujian, Zhejiang, and Shanghai—have become members of various political factions. Li is considered a member of the Zhejiang faction, and Vice Premier He Lifeng is part of the Fujian group. These factions compete fiercely for benefits and interests, often refusing to yield. The divisions and conflicts within the State Council are worsening the economic situation.
For example, at a meeting on Oct. 8 that Li chaired, Executive Vice Premier Ding Xuexiang was notably absent, as was He, the vice premier in charge of the economy, who had traveled to Xinjiang a day earlier. This shows that Li lacks support from his colleagues.
The lack of follow-up on the major stimulus policies announced by the central bank, the National Financial Regulatory Administration, and the China Securities Regulatory Commission indicates that the CCP’s economic stimulus efforts are largely superficial. The CCP seems more focused on political infighting than on addressing economic problems, exacerbating China’s challenges.
