China confident on growth goal, markets await more stimulus

By Kevin Yao, Joe Cash and Ellen Zhang

BEIJING (Reuters) -China said on Tuesday it was "fully confident" of achieving its full-year growth target but refrained from introducing stronger fiscal steps, disappointing investors who had banked on more support from policymakers to get the economy back on track.

China shares rallied in early trade to two-year highs after the long National Day holiday but quickly lost steam after the state planner did not provide details to sustain market optimism. Hong Kong shares slumped as investors also walked back some of the stimulus excitement.

Chairman of the National Development and Reform Commission (NDRC) Zheng Shanjie told a press conference the government planned to issue 200 billion yuan ($28.3 billion) in advance budget spending and investment projects from next year.

The country will also quicken fiscal spending and "all sides should keep making efforts more forcefully" to strengthen macroeconomic policies, he added.

"The international market is volatile, global trade protectionism has intensified, and uncertain and unstable factors have increased. These will have an adverse impact on my country through trade, investment, finance and other channels," Zheng said.

Investors and economists say more policy support is needed on the fiscal side to sustain the market's optimism, likely to be issued by the finance ministry.

"So far, the NDRC press conference appears to run short on details with regards to stimulus measures. Hopes were raised but the delivery was disappointing," said Christopher Wong, currency strategist at OCBC.

In an effort to reverse the economic downturn, China unveiled before the week-long Golden Week holiday its most aggressive monetary stimuluspackage since the COVID-19 pandemic, coupled with extensive property market support.

Premier Li Qiang on Tuesday urged all government departments to support growth and improve policy coordination during a special study session on economic policy held by the cabinet, according to state television.

Separately, state television quoted Li as saying China would unveil specific plans for policies that are being studied, and consider reserve policies for next year.

MORE SUPPORT NEEDED

Analysts said it would take time to restore consumer and business confidence and get the economy back on more solid footing. A housing market recovery, in particular, could be a long slog.

"We anticipate that the government will arrange 1-3 trillion yuan of additional fiscal support this year and next to boost the real economy, recapitalise banks, and stabilise the property market," said Yue Su, principal China economist at the Economist Intelligence Unit.

"This, along with investments from special long-term bonds planned for next year, is expected to primarily impact 2025's economic growth."

The Economist Intelligence Unit retains its economic forecast of 4.7% growth for this year and 4.8% growth in 2025, Su said.

The government set a growth target of around 5% this year, but economic indicators showed growth momentum has waned since the second quarter, weighing on household spending and business sentiment amid a severe property downturn.

A private report by recruiting platform Zhaopin showed that average pay offered by recruiters in China's 38 major cities fell 2.5% in the third quarter from the second, and down 0.6% from a year earlier.

To address insufficient domestic demand, Zheng told reporters that policymakers will focus on enhancing people's livelihood to stimulate consumption and investment, such as supporting disadvantaged people, consumer goods trade-ins, elderly care and births. No further details were announced.

Vice Chairman of the NDRC, Liu Sushe, stated that most of the 6 trillion yuan in government investment this year was allocated to specific projects, with 90% of local government special bonds used for project construction issued by September.

The government has issued 1 trillion yuan of ultra-long-term special bonds planned for this year to fund major projects, and more such bonds will be issued next year, Zheng said.

At the same press conference, another vice chairman of the NDRC, Zhao Chenxin, said that China's economic growth had remained "generally stable" over the first three quarters.

($1 = 7.0597 Chinese yuan)

(Editing by Muralikumar Anantharaman, Jacqueline Wong and Christina Fincher)