Business
China redoubles first-aid for its economy with support for banks and workers
China is redoubling its first-aid for its economy, targeting banks, workers and poor families as the ruling Communist Party prepares to mark the 75th anniversary of the founding of the People’s Republic.
Unconfirmed reports Thursday by the South China Morning Post and Bloomberg said the government plans to spend about 1 trillion yuan ($142 billion) on recapitalizing six big state-owned banks. The reports citing unnamed people familiar with the situation follow this week’s statement by Li Yunze, head of the National Financial Regulatory Commission, that regulators would increase capital at six large banks.
Defaults by real estate developers following a crackdown several years ago on excessive borrowing for property projects have weighed on the banking sector, prompting the latest bailout.
Banks’ interest margins and profits have shrunk, so “it is necessary to coordinate various channels such as internal and external channels to replenish capital,” Li told reporters in Beijing.
President Xi Jinping and other top leaders held a quarterly meeting on the economy on Thursday, state media said, and acknowledged “some new situation and problems” had emerged. They promised to focus on support for new college graduates, migrant workers, the unemployed, elderly and disabled.
The capital increase for the banks and promises of other measures were a second flurry this week of stimulus for the world’s second-largest economy as it struggles to regain momentum after the COVID-19 pandemic. For a second time this week, financial markets rejoiced.
Hong Kong’s Hang Seng jumped 4.2% and the Shanghai Composite index surged 3.6%. The smaller market, in Shenzhen, was up 4.2%. Markets elsewhere in Asia and in Europe also logged strong gains.
The raft of new measures to pump up growth began Tuesday, when officials from the central bank and other government agencies held a news conference in Beijing announcing various measures to help revive China’s ailing property sector and prop up financial markets.
Those measures included lower bank reserve requirements, reduced interest rates and smaller minimum down payments for some mortgages.
The statement issued after the meeting Thursday of the ruling party’s powerful Politburo called for “additional policies” for new problems that have cropped up, Julian Evans-Pritchard of Capital Economics said in a commentary.
“However, it remains unclear if this will include the large-scale fiscal support needed to stabilize growth,” he said.
China’s leaders appear determined to show they are taking action to restore confidence in the economy on the eve of the Oct. 1 National Day holiday, 75 years after the communists took power in 1949.
The government also announced special “living allowances,” or cash handouts, for the poor ahead of National Day observances. A notice from the Civil Affairs Ministry did not say how much would be paid. Although subsidies to ordinary people are uncommon, the ruling Communist Party sometimes marks special occasions with payments to families in difficulty.
“We must look at the current economic situation comprehensively, objectively and calmly, face up to difficulties, strengthen confidence, and effectively enhance the sense of responsibility and urgency to do a good job in economic work,” said the statement issued after the Politburo meeting.
The dollar steadied against major peers on Thursday, continuing its near paralysis of the past two days before more concrete announcements on tariffs from U.S. President Donald Trump.
A spate of central bank policy decisions are also due over the next week, with the Bank of Japan widely expected to raise interest rates at the end of a two-day meeting on Friday.
Rate decisions from the U.S. Federal Reserve and European Central Bank are scheduled for Wednesday and Thursday of next week, respectively.
The dollar index – which measures the currency versus six top rivals, including the euro and yen – was flat at 108.25, following two days of gains of around 0.1%.
On Monday, it tumbled 1.2%, its steepest one-day slide since November 2023, as Trump’s first day in office brought a barrage of executive orders, but none on tariffs.
So far this week, Trump has mooted levies of around 25% on Canada and Mexico and 10% on China from Feb. 1. He also promised duties on European imports, without giving details.
“President Trump has so far taken a less hostile-than-expected approach to China,” amid overall “softer-than-expected policies and tone on tariffs”, said Carol Kong, a currency strategist at Commonwealth Bank of Australia.
At the same time, “we are cautious (that) risk sentiment remains fragile and can quickly turn sour if President Trump strikes a more aggressive tone.”
The Chinese yuan was little changed at 7.2812 per dollar in offshore trading .
Wall Street’s main indexes rose Wednesday, with the S&P 500 hitting an intraday record high thanks to strong Netflix earnings and a rally in tech shares.
Japan’s yen edged up about 0.1% to 156.40 with markets pricing 95% odds of a quarter-point hike on Friday.
The euro was flat at $1.0411. The ECB is widely expected to cut rates by a quarter point next week.
The Canadian dollar held steady at C$1.4386 against the greenback. The Bank of Canada is seen as likely to reduce rates by a quarter point next Wednesday.
The Mexican peso was little changed at 20.47 versus the U.S. currency.
Oil prices dipped in early trade on Thursday, extending losses amid uncertainty over how proposed tariffs by U.S. President Donald Trump on several countries would impact global economic growth and energy demand.
Brent crude futures fell 23 cents, or 0.3%, to $78.79 a barrel at 0135 GMT, while U.S. West Texas Intermediate crude (WTI) eased 18 cents, or 0.2%, to $75.26.
In its previous session, Brent futures settled at $79.00 in a fifth straight day of losses. WTI futures settled at $75.44 in a fourth consecutive day of declines.
Trump has said he would add new tariffs to his sanctions threat against Russia if the country does not make a deal to end its war in Ukraine. He added these could be applied to “other participating countries” as well.
He also vowed to hit the European Union with tariffs, impose 25% tariffs against Canada and Mexico, and said his administration was discussing a 10% punitive duty on China because fentanyl is being sent to the U.S. from there.
Meanwhile, estimates from an extended Reuters poll showed that on average U.S. crude oil stockpiles were expected to have fallen by 1.6 million barrels in the week to Jan. 17.
Gasoline stockpiles were estimated to have risen by 2.3 million barrels last week, and distillate inventories were likely to have gained 300,000 barrels.
The poll was conducted ahead of the American Petroleum Institute industry group’s report and another from the Energy Information Administration at 12:00 p.m. ET (1700 GMT) on Thursday.
European wind shares fell on Tuesday (January 21).
The reports were delayed by a day due to the Martin Luther King Jr. Day federal holiday on Monday.
Pakistan and Saudi Arabia have reaffirmed their commitment to further strengthening the bilateral economic ties for shared prosperity.
The commitment was expressed when Finance Minister Muhammad Aurangzeb met with his Saudi counterpart Mohammad bin Abdullah Al-Jadaan on the sidelines of World Economic Forum Annual Meeting in Davos.
Muhammad Aurangzeb highlighted the key reform measures undertaken by the Government to promote economic stability and sustainable growth.
He briefed him on structural reforms, fiscal discipline and regulatory improvements that have contributed to an improved investment climate in Pakistan.
Earlier, Aurangzeb met Anna Bjerde, Managing Director of Operations at the World Bank.
They discussed cooperation between Pakistan and the World Bank, with a particular focus on Pakistan’s macroeconomic stability.
The finance minister emphasized the government’s strong partnership with the Bank and expressed hope that the World Bank would continue playing a key role in the country’s socio-economic development.
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