World: China Unveils Its Shock Plan To Revive The Economy

The world’s second-largest economy is preparing to launch a comprehensive set of measures aimed at boosting its sluggish growth. After months of hesitation, Beijing seems finally ready to deploy heavy artillery to revive an economy weighed down by the real estate crisis and weak consumption.

China mobilizes its forces to revive its economy

China is about to unveil a new economic stimulus plan this Tuesday as the country faces persistent headwinds.

This announcement, scheduled for a press conference by the National Development and Reform Commission, comes amid a marked slowdown, particularly in the key sectors of real estate and consumption.

This new government effort comes barely ten days after a first wave of measures that electrified financial markets. Chinese authorities thus seem determined to stay the course and intensify their efforts to invigorate the world’s second-largest economy.

Among the expected provisions are notably:

• Tax cuts to stimulate household consumption
• A massive bond issuance to finance major infrastructure projects
• New aid for the struggling real estate sector
• Targeted support measures for SMEs and employment

Authorities seem determined to achieve the 5% growth target set for this year at all costs, a figure deemed very ambitious by many experts. This all-out recovery initiative contrasts with the more cautious approach adopted in recent months.

Persistent structural challenges

Despite the scale of the announced measures, some analysts remain cautious about their long-term effectiveness. Alicia Garcia Herrero, chief economist for Asia-Pacific at Natixis, emphasizes the need for deeper structural reforms: 

“Unless China introduces fundamental changes, such as improving the social protection system, I doubt we will see a major change.”

The reduction of real estate sector debt and sustainable stimulation of domestic consumption remain crucial issues for the Chinese economy. The case of property developers Country Garden and Evergrande, on the brink of bankruptcy, illustrates the persistent fragility of the market.

Financial markets reacted positively to the announcement of this stimulus plan, with a significant rise in Chinese stocks. However, only a sustained economic recovery in the coming months will allow the real effectiveness of these measures to be judged. The upcoming publication of the growth figure for the third quarter will be a key indicator for assessing the initial impact of this ambitious plan on the Chinese economy.