China reveals policy package to stabilize economy

A vehicle is assembled at SAIC Motor Company's Lingang base in Shanghai, east China, April 23, 2022. Photo by Xinhua

China's State Council issued a circular on Tuesday detailing a policy package that aims to stabilize the economy amid an elevated risk caused by the COVID-19 pandemic and the Russia-Ukraine conflict.

The package was first announced at a State Council executive meeting last week, now the State Council urged local governments to implement the detailed policy measures.

The package covers six areas, including fiscal, consumption and supply chain, with a total of 33 measures.

In terms of fiscal policy, China will quicken the issuance of local government special bonds and widen the scope of support. Apart from the nine sectors included on the support list, new infrastructure and new energy projects should be given priority to be supported, the State Council said.

China will speed up the issuance and use of the 3.45 trillion yuan special bond quota issued this year. It has targeted to complete the issuance by the end of June, and work to complete use of the fund by the end of August.

China will improve the financing efficiency via capital markets and facilitate the normalization of initial public offerings and refinancing. It will support mainland companies to list in Hong Kong and promote the overseas listing of qualified platform enterprises.

To boost investment and consumption, China will support the healthy development of the platform economy and utilize the development of platform enterprises to drive relief for small, medium and micro-enterprises. The State Council also acknowledged the role of the sector in stabilizing employment.

Boost car sales

No new vehicle purchase restrictions shall be issued, and regions that have implemented purchase restrictions should gradually relax those measures, according to the circular.

Automobile sales account for 10 percent of China's total retail sales, which serves as a key sector to expand domestic demand and stimulate consumption, said Sheng Qiuping, vice minister of commerce, at a news conference following the release of the circular.

Noting that China's passenger car sales plummeted by more than a third in April, Sheng said that the Ministry of Commerce will work with relevant departments to issue detailed implementation measures to boost automobile sales and will focus on increasing the sales of new cars and revitalizing the market of second-hand cars.

The department will also work to promote new energy vehicle sales in the countryside and actively support the construction of charging facilities, Sheng added.

The package also includes deferring social security payments of enterprises hit hard by the pandemic, accelerating the kicking off of some energy projects and stabilizing supply chains.

With the repeated emphasis on implementing the economic stabilization policies and the easing of COVID-19 control measures, the recovery trend is on track to last, said Wang Jingwen, director of macro-research with China Minsheng Bank.

The benchmark Shanghai Composite Index jumped 1.19 percent, the Shenzhen Component Index climbed 1.92 percent, and the ChiNext Index gained 2.33 percent by market close on Tuesday.