Xi's big stimulus plan aims to draw a line under China's slowdown

BEIJING For months, President Xi Jinping appeared unfazed by slowing growth as stocks slumped, prices fell and discontent grew around China. This past week has shown that he is no longer willing to tolerate any more pain.

The People's Bank of China launched the initiative to revive sentiment on September 24 in a rare televised press briefing broadcast live around the world, opening its war chest to stock markets and making money cheaper to borrow.

The next day, it kept the news positive by lowering the interest rate on its one-year loans to lenders in a record manner, while the government handed out rare cash aid and launched new grants for some graduates unemployed.

The 24-man Politburo, led by Mr. Xi, followed on September 26 with more pro-growth gifts, promising to increase fiscal spending and pledging for the first time to prevent the fall in real estate prices. He also unveiled a new focus on boosting consumption, saying this was necessary to address the concerns of the masses.

These efforts continued until September 27, when the head of the National Development and Reform Commission pledged full support to Chinese private companies to help them overcome difficulties, saying these companies and entrepreneurs were one of us.

The policy pivot by top leaders gave the struggling country's benchmark CSI 300 index its biggest weekly gain in more than 15 years. US billionaire David Tepper said he was buying more of everything from China after the massive stimulus measures.

The barrage of stimulus measures marked a sea change in Mr Xi's approach to managing the world's second-largest economy and Singapore's biggest export market, after proudly resisting major stimulus measures for so long. RELAUNCH. In recent years, the Chinese leader has put national security and reducing financial risks at the forefront, signaling his willingness to sacrifice some growth to make the economy more independent from the increasingly hostile United States.

Mr Neil Thomas, a Chinese politics researcher at the Asia Society Policy Institutes' China Analysis Center, said the many weeks of stimulus showed it was incorrect to say Xi doesn't care of the economy or that it is purely ideological in its political objectives. It needs a basic level of growth to maintain social stability, build international power and achieve national rejuvenation.

The timing of Mr. Xi's adrenaline shot was telling.

The American Federal Reserve had just lowered its rates, thus reducing pressure on the Chinese renminbi. Meanwhile, Wall Street banks have lowered their growth forecasts below Beijing's annual target of around 5 percent, and China's upcoming national holiday has given disgruntled families a chance to share the gloom over reunion dinners.

A growing number of leading Chinese economists, including former central bank chief Yi Gang, have issued veiled warnings in recent weeks that a shift to support demand was needed to prevent China from drifting into a deflationary spiral. Companies mired in a fierce price war are laying off workers, while college graduates are struggling to find work, pushing the youth unemployment rate in August to a record high in 2024.

It's clear that China's top policymakers are spooked, said Mr Adam Wolfe, emerging markets economist at Absolute Strategy Research. My best guess is that they saw signs of a slowdown in the job market, and that prompted them to act.

But while the multi-pronged policy agenda marked a change for Mr. Xi and sparked enthusiasm in stock markets, it did little to resolve the deep-rooted problems that undermine the long-term outlook.