In recent years, the Chinese economy has been steadily declining. To rescue the stock market, the Chinese Communist Party (CCP) plans to establish a 2 trillion yuan stock market stabilization fund; to rescue the property market, it has introduced initiatives such as the renovation of a million units in urban villages. Simultaneously, top officials of the CCP State Council have uncommonly been dispatched to various regions for inspection, seen as preparation for the end-of-year Central Economic Work Conference.
Regarding the CCP’s drastic shift in economic policies from “no flood irrigation” and “housing is for living, not for speculation,” recent interpretations by official experts point to top officials forming a “new consensus” in response to the “new problems” emerging in the Chinese economy. This “new consensus” discussed by experts almost overturns the economic policies pursued by Xi Jinping in the past two years, attracting widespread attention.
The Chinese Academy of Social Sciences Institute of Finance recently issued a report suggesting the urgent implementation of more expansionary fiscal policies to stabilize the macroeconomic situation. It recommends issuing a 1 trillion yuan (about 140.6 billion USD) special national debt in October this year, further increasing to 4 to 5 trillion yuan (about 562.3 to 702.9 billion USD) in the first half of next year, utilizing special national debt to support basic livelihood security.
To stimulate the stock market, the report suggests issuing 2 trillion yuan (about 281 billion USD) in special national debt to support the establishment of the Stock Market Stabilization Fund. This would promote market stability through buying low and selling high on blue-chip stocks and exchange-traded funds (ETFs), moderately increasing the proportion of insurance company funds invested in the stock market, and elevating the proportion of funds indirectly entering the market through the National Social Security Council’s management of local social security funds.
Jia Kang, founding director of the Huaxia New Supply Economics Research Institute and a former proponent of the 4 trillion stimulus policy, recently stated that even 10 trillion yuan (approximately 1.4 trillion USD) would not be an exaggeration.
Will the recommendations from institutes like the Chinese Academy of Sciences Institute of Finance be implemented? In the coming weeks, the National People’s Congress Standing Committee is expected to convene a meeting approving tens of trillions of US dollars in government spending, becoming a focal point in the market.
In terms of stimulating the property market, on the 17th, the Minister of Housing and Urban-Rural Development, Ni Hong, mentioned during a press conference at the State Council Information Office the introduction of multiple policy measures for the real estate market. The most notable among them include adding an additional 1 million units for the transformation of urban villages and dilapidated buildings through methods like “monetization resettlement,” and increasing the credit scale of the “white list” program to over 4 trillion yuan (about 562.3 billion USD) by the end of the year.
“Monetization resettlement” involves the government providing monetary compensation to displaced residents for them to purchase housing independently, enhancing market liquidity in the real estate sector and alleviating the government’s burden of constructing resettlement housing. While this method has had significant effects in previous urban renewal projects, the scale of 1 million units falls far short compared to past initiatives, leading to doubts about its effectiveness.
China’s urban renewal initiatives began in 2008, with over 12.6 million households in various shantytowns renovated from 2008 to 2012, with a cumulative investment exceeding 400 billion yuan (approximately 56.2 billion USD) from both central and local governments. Calculated based on this data, the average annual number of refurbished units during this stage was around 2.5 million.
Subsequently, from 2014 to 2018, urban renewal projects reached a peak, with data from the Ministry of Housing and Urban-Rural Development indicating that the annual initiation of urban renewal projects totaled over 6 million units from 2015 to 2018 (six times that of the current renewal project), with the highest annual investment in urban renewal reaching 1.84 trillion yuan (about 258.6 billion USD).
After 2019, urban renewal efforts waned, with plans reducing to 2.85 million units that year, and actual construction starting on 3.16 million units. The subsequent years of 2020 and 2021 saw a further decline, with actual construction starting on 2.09 million units and 1.65 million units, respectively.
On another front, the Ministry of Housing and Urban-Rural Development stated that loans to real estate enterprises included in the “white list” will reach over 4 trillion yuan (approximately 562.2 billion USD) by the end of the year. As of October 16, approved loans for “white list” real estate projects reached 2.23 trillion yuan (around 313.4 billion USD). It is anticipated that by the end of 2024, the approved loan amount for “white list” projects will double, surpassing 4 trillion yuan.
Nomura Securities’ Chief China Economist, Lu Ting, previously stated, “There are about 20 million unfinished pre-sale housing units in China.” A Nomura report suggests that completing these properties would require about 3.2 trillion yuan (approximately 449.8 billion USD).
While high-ranking officials from the People’s Bank of China, the Ministry of Finance, and the Ministry of Housing and Urban-Rural Development have been actively explaining stimulus policies to the public, top executives of the CCP State Council have recently fanned out to various regions for inspections to ensure the implementation of related policies.
According to the Beijing Youth Daily’s “Political Intelligence” media under the Beijing Youth Daily, from the 14th to the 17th, Vice Premier of the State Council Ding Xuezhang conducted surveys in Henan and Jiangsu; Vice Premier He Lifeng visited Taiyuan, Shanxi and Xi’an, Shaanxi from the 10th to the 12th; Vice Premier Zhang Guoqing surveyed Hunan from the 14th to the 16th; and Vice Premier Liu Guozhong visited Chongqing and Hubei from the 14th to the 17th.
Communist Party Secretary and State Councilor Wang Xiaohong surveyed in Tianjin from the 15th to the 16th; State Councilor and Secretary-General of the State Council Wu Zhenglong visited Shandong and Jilin from the 14th to the 16th; State Councilor Shen Yiqin surveyed in Hainan recently; Chairman of the National Committee of the Chinese People’s Political Consultative Conference Wang Huning went to Zhejiang from the 15th to the 17th; and Secretary of the Central Discipline Inspection Commission Li Xi surveyed in Tianjin from the 14th to the 16th.
The rare move of high-level CCP State Council and Party affairs officials to various regions has been linked to the ongoing decline in the Chinese economy. The official GDP growth rate for the third quarter of the current year was announced by the CCP at 4.6%, below the set target of 5%.
Commentator Wen Zhao pointed out in the “Wen Zhao Talks about the Past and Present” channel that the top officials visiting local areas are gathering the latest data to finalize specific economic policies at the upcoming Central Economic Work Conference later this year.
Wen Zhao believes that “more specific economic policies are unlikely to be introduced until early next year. There will be no groundbreaking policies in the next two months. During this period, various ministries of the CCP may continuously announce the progress of their previously launched favorable policies to maintain the current ‘bullish’ state of the stock market.”
The recent complete reversal of economic policies by the CCP, overturning Xi Jinping’s steadfast principles of “no flood irrigation” and “housing is for living, not for speculation” in recent years, has prompted various interpretations from external sources. However, there has been no clear official response to the reasons behind this change. Liu Yuanchun, a frequent participant in official economic meetings of the State Council, provided an explanation. He stated that top officials recently reached a “new consensus” on the Chinese economy.
Liu Yuanchun, who serves as the President of the Shanghai University of Finance and Economics and as a member of the 14th National Planning Commission of the CCP, regularly attends national economic expert forums, providing insights for China’s macroeconomic policymaking.
On October 18, during a forum, Liu Yuanchun delivered a speech on current Chinese policies and economic trends, offering an in-depth analysis of the significant policy shift.
Liu Yuanchun highlighted that the Chinese economy is facing “new problems,” such as GDP growth falling short of expectations in the second and third quarters of this year, contrary to the earlier set target of 5%; the lack of observable effects from the previous large-scale stimulus policies in the real estate sector known as the “517 policy”; and the financial difficulties encountered by local governments, unable to utilize allocated funds effectively.
He further stated that the “new problems” have led to a “new consensus” among the top officials, prioritizing short-term measures for stabilizing the real estate and capital markets over their long-term positioning. Liu emphasized that stability in the real estate and capital markets is a focal point for maintaining expectations, supporting businesses, instilling confidence, and promoting domestic consumption.
The shift in positioning mentioned by Liu implies a halt to Xi Jinping’s previous long-term plans to deflate the real estate bubble and reduce leverage, overriding these initiatives to address the immediate crises in the stock and property markets.
Regarding the CCP’s high-level agreement on this “new consensus,” political commentator Tang Jingyuan previously told Epoch Times that during this year’s National Day reception, veteran politicians like Wen Jiabao sat alongside Xi Jinping, creating an awkward “old men’s political intervention” scenario for Xi. This spectacle sheds light on how the recent sharp turn in economic policies is a result of “economic pressure compelling political changes.”