BEIJING, China — China on Tuesday unveiled some of its boldest measures in years aimed at boosting its struggling economy as leaders grapple with a prolonged property sector debt crisis, continued deflationary pressure and high youth unemployment.
The world's second-largest economy has yet to achieve a highly anticipated post-pandemic recovery and the government has set a goal of five percent growth in 2024 -- an objective analysts say is optimistic given the headwinds it is facing.
On Tuesday, central bank chief Pan Gongsheng told a news conference in Beijing that it would cut a slew of rates in a bid to boost growth, pledging to "promote the expansion of consumption and investment".
The moves represent "the most significant... stimulus package since the early days of the pandemic", Julian Evans-Pritchard, Head of China economics at Capital Economics.
But "it may not be enough", he warned, adding a full economic recovery would "require more substantial fiscal support than the modest pick-up in government spending that's currently in the pipeline".
Among the moves unveiled Tuesday was a cut to the reserve requirement ratio (RRR), which dictates the amount of cash banks must hold in reserve.
The move will inject around a trillion yuan ($141.7 billion) in "long-term liquidity" into the financial market, Pan said.
Beijing would also "lower the interest rates of existing mortgage loans".
And it will "guide commercial banks to lower the interest rates of existing mortgage loans to the vicinity of the interest rates of newly issued loans".
The move would benefit 150 million people across the country, Pan said, and reduce "the average annual household interest bill by about 150 billion yuan."
'Most significant stimulus' in years
Shares in Hong Kong and Shanghai rallied Tuesday after China unveiled the measures.
But Heron Lim Shi Shun at Moody's Analytics said the move was expected given gloomy economic data in recent months suggesting Beijing could miss its 2024 growth target.
"But this is hardly a bazooka stimulus," he told AFP.
"Far more monetary easing and a stronger government stimulus is also desirable to finish bailing out the real estate market and inject more confidence into the economy," he said.
At a minimum, he added, "broader direct household support in helping them consume more goods will be useful, which is currently just too narrowly designed for industrial goods".
Property and construction have long accounted for more than a quarter of China's gross domestic product, but the sector has been under unprecedented strain since 2020, when authorities tightened developers' access to credit in a bid to reduce mounting debt.
Since then, major companies including China Evergrande and Country Garden have teetered, while falling prices have dissuaded consumers from investing in property.
Beijing has unveiled a number of measures aimed at boosting the ailing sector, including cutting the minimum down payment rate for first-time homebuyers and suggesting the government could buy up commercial real estate.
But those measures failed to boost confidence and housing prices have continued to slide.
Adding further strain, local authorities in China face a ballooning debt burden of $5.6 trillion, according to the central government, raising worries about wider economic stability.
Speaking alongside the central bank chief Tuesday, Director of the National Administration of Financial Regulation Li Yunze said Beijing will "actively cooperate in resolving real estate and local government debt risks".
"China's financial industry, especially large financial institutions, is operating stably and risks are controllable," he insisted.
"We will firmly maintain the bottom line of preventing systemic financial risks," he added.