China announces 19 new measures to boost struggling economy

New measures announced by China’s cabinet on Wednesday amounted to more than 1 trillion yuan ($146 billion) in financing to improve infrastructure, ease power shortages and combat drought, including boosting rice production. It also includes funding to secure.

“The current economic recovery has a weak foundation,” the statement said, adding that the new funding was aimed at stabilizing the economy. Premier Li Keqiang hosted the ministerial meeting.

Beijing has tried this year to boost investment and consumption in China, the world’s second largest economy. The government announced in his May 33 measures to revive growth.

Several major investment banks, including Goldman Sachs and Nomura, have downgraded China’s economic growth. In 2022, it is predicted to be 3% or less due to the heat wave. Hit the industrial heartland. That is well below his 5.5% growth target set by the Chinese government earlier this year.

China’s biggest focus continues to be infrastructure growth.

With the support of the central bank, The state development bank could lend $44 billion to finance infrastructure projects, the statement said. This adds to his $161 billion already committed in June.

Local governments will also be allowed to issue $73 billion in debt to finance the construction of roads, railroads, airports, affordable housing and energy projects. This is in addition to 3.5 trillion yuan ($511 billion) of bonds that were authorized to be issued earlier this year for the same purpose.

China's No. 2 concedes that its economic recovery is at its 'most difficult point'.
Li also urged all government departments to “do a better job” in fighting the drought and mitigating its effects. He called for China to drill more wells and develop drought-tolerant water sources, in addition to seed clouds it relied on earlier this month to bring more rainfall to the Yangtze.

“Ensuring people’s drinking water and transporting and delivering water as needed should be a priority,” Li added.

The central government also takes 10 billion yuan ($1.5 billion) from reserves for drought relief, focused on ensuring rice production during the critical mid-season harvest for rice in the Southern region.

“[We should] We will do everything possible to secure agricultural irrigation water and help farmers fight drought and protect their autumn crops,” Lee said.

The government will support research into measures to promote a “rich harvest” of late-ripening rice in the fall, he added.

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Analysts were not optimistic about the impact of the new stimulus on the economy.

Goldman Sachs analysts said in a note late Wednesday that “these measures could help offset a sharp contraction in government revenues and provide some support for infrastructure investment growth in the coming months. .

However, given that the real estate sector is “very weak” and headwinds from the coronavirus lockdowns continue to weigh on the economy, “besides some key policy easing measures”, the overall outlook for the remainder of the year is likely to remain low. We expect growth to slow down.

Troubles in the real estate sector, which accounts for 30% of China’s GDP and was already suffering from a prolonged cash shortage, are putting a lot of pressure.

The crisis has snowballed since sprawling developer Evergrande defaulted last year. Real estate prices are falling, and so are sales of new homes. Angry homebuyers across the country are threatening to stop making mortgage payments on unfinished homes, shaking markets and prompting businesses and authorities to take action to defuse the crisis..

Analysts at Nomura said the new stimulus would not be a “game changer”.

“Corona-zero policies continue to consume a large amount of local government financial resources,” they said, adding that the real estate sector “still faces serious problems.”

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