China’s Politburo pledges support for economy and boosts markets

People in facemasks walk along a street amid snowfall, following the coronavirus disease (COVID-19) outbreak, in a shopping district in Beijing, China, March 17, 2022. REUTERS/Tingshu Wang

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BEIJING, April 29 (Reuters) – China will step up policy support for the economy, including on controversial internet platforms, as domestic COVID-19 outbreaks and the war in Ukraine pose risks, a top decision-making body of the ruling Communist Party said . on Friday, lifting markets.

Beijing has set an economic growth target of 5.5% this year, which private economists say will be difficult to achieve without significant stimulus, as lockdowns and other tough measures to fight the pandemic wreak havoc in supply chains. read more

At Friday’s meeting chaired by President Xi Jinping, the Politburo said it will support industries and small businesses affected by COVID-19, accelerate infrastructure construction and stabilize transportation, logistics and supply chains, according to a report by the state-run Xinhua news agency.

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Chinese stock prices rose, especially internet stocks that were battered by a slump last year, as the Politburo’s promise to “promote the healthy development of the platform economy” boosted hopes the worst is over for the sector.

A person with knowledge of the matter said China would hold a symposium with the country’s internet majors early next month.

COVID-19 and events in Ukraine have intensified headwinds for the economy in what is a pivotal year for China and for Xi, who is expected to secure a precedent-breaking third term of leadership in the fall.

“Stabilizing growth, employment and prices face new challenges. It is very important to do a good job in economic work and effectively protect and improve people’s livelihoods,” said Xinhua.

Analysts believe that more stimulus measures and some easing of real estate restrictions will be needed if the government is to meet its growth target of around 5.5% for 2022.

“While these messages are positive, the key is about specific policies and their implementation,” said Zhiwei Bhang,

president and chief economist at Pinpoint Asset Management.

“The economy is in trouble and GDP growth in the second quarter is likely to turn negative (year-on-year). Significant macro-policy change is needed to turn the economy around,” he said.

Ting Lu, China’s chief economist at Nomura, said he still expected the economy to grow by 1.8% in the second quarter and 3.9% in 2022.

Financial markets have been hit hard in the past two weeks by fears that lockdowns would seriously damage China’s economy and derail a global recovery, just as many countries are recovering from the pandemic-induced slump.

China’s benchmark stock index is up more than 2% on Friday, while the technology-focused STAR50 index is up nearly 5%. Shares of Hong Kong-listed technology companies rose, with the Hang Seng Tech Index (.HSTECH) rising 10%.

On Tuesday, Xi chaired a meeting announcing a major infrastructure push to boost demand, making Beijing more dependent on large-scale projects to fuel growth. read more

“We need to accelerate policy implementation, implement tax cuts, tax and benefit cuts and other policies, and make good use of all kinds of monetary policy tools,” said Xinhua’s readout from Friday’s meeting.

Beijing will also support “healthy” real estate market development, including improved oversight of presale escrow funds, fueling analysts’ expectations that some cities will ease oversight of such funds to help alleviate a liquidity crisis for developers.

Still, the Politburo said authorities will continue to implement the controversial dynamic zero-COVID policy to contain outbreaks while minimizing the impact of the pandemic on the economy.

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Reporting by Kevin Yao and Beijing editors; Editing by Shri Navaratnam, Stephen Coates and John Stonestreet

Our Standards: The Thomson Reuters Trust Principles.

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