China announces a host of stimulus measures to boost sagging economy

China will inject a massive stimulus package of an additional 1 trillion yuan — $146 billion– to bolster sagging growth and create jobs. The local governments, which are key to Beijing’s growth plan, will be allocated 500 billion yuan comprising special bonds from unused quota.

According to Bloomberg, the State Council — China’s Cabinet has carved out a 19-point policy package. This also includes another 300 billion yuan that state policy banks can invest in infrastructure projects, it said.

Several local governments have also started to offer additional loans to real estate companies to facilitate completion of projects after thousands of home buyers stopped paying EMIs.

To boost the real estate sector, the People’s Bank of China (PBOC) also announced a reduction of the five-year loan prime rate (LPR) by 1.5 percentage points– the biggest cut recorded. The five-year rate now stands at 4.2 per cent. The move will reduce the cost of borrowing, thus providing relief to the home buyers.

Beijing’s zero Covid approach has added to the problem. This has impacted businesses and employment.

According to the National Bureau of Statistics (NBS) data the country’s urban youth unemployment rate touched 19.9 per cent in July– the highest since January 2018 when record keeping of the same was launched.

China’s manufacturing output measured in terms of purchasing managers’ index (PMI) dropped to 49 in July from 50.2 in June. Any reading above 50 is considered as growth while a sub 50 score indicates contraction.

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