观点丨潘颖豪：China's bold stimulus: Passion, patience & perseverance

Recently, China's State Council unveiled an ambitious stimulus package designed to revive the country’s slowing economy. Faced with weakening industrial output, a slump in global demand and mounting domestic challenges, the package marks Beijing's clear commitment to charting a more sustainable and resilient path forward. 

On October 12, the Ministry of Finance and, earlier, on October 8, the country's top economic planner National Development and Reform Commission, held press conferences announcing a series of measures aimed at stabilizing the economy. These policies address both short-term economic pressures and long-term structural reforms, reflecting a strategic plan that acknowledges the complexities of recovery. 

This policy shift can be viewed through three keywords: passion, patience, and perseverance – each essential to understanding China's evolving economic strategy.

At the heart of the new policy blueprint is a drive to push China toward high-quality, sustainable growth. 

Central to this shift is a focus on boosting domestic consumption and reinvigorating the private sector, a notable departure from the past reliance on state-led, investment-heavy models. 

Recognizing that consumption must play a larger role in driving the economy, Beijing is now prioritizing demand-side reforms aimed at creating lasting momentum. One of the centerpiece programs is the "two new" initiative, which promotes large-scale equipment upgrades and "old-for-new" replacement schemes for items like automobiles and home appliances. 

Already, these policies are showing results: car sales are expected to jump 10 percent in September, spurred by government incentives to encourage consumers to upgrade older vehicles. Similarly, home appliance sales – previously stagnant – are also rebounding, aided by targeted subsidies that aim to fuel household spending.

In addition to consumption, the government is placing a strong emphasis on supporting private enterprises, particularly small and medium-sized businesses (SMEs). These companies, crucial for long-term economic stability, are benefiting from policies that ease regulatory burdens and improve access to financing. Low-interest loans and flexible regulatory frameworks have been rolled out to help SMEs navigate current challenges while fostering their growth. This focus on the private sector reflects Beijing's understanding that private enterprise will be critical for driving innovation, employment, and sustainable growth.

The government is also ramping up support for private investment in infrastructure projects through public-private partnerships. By leveraging over 3.4 trillion yuan ($480 billion) of private capital in sectors like transportation and energy, China aims to bolster infrastructure development without overwhelming public finances, while signaling its intent to make private capital a key player in the recovery.

While China pushes for economic growth, it calls for patience in the face of structural reforms. The structural reforms required for this new economic model are not quick fixes; they will take time to bear fruit. The stimulus package is not only designed to counter immediate economic challenges but also to lay the groundwork for deeper, long-term transformation.

Energy restructuring is a prime example. China's policies to reduce fossil fuel dependence and enhance energy efficiency are ambitious, but these shifts will take years to make a tangible impact. Similarly, the government's investments in urbanization and infrastructure, supported by more than 700 billion yuan in central budget funding are long-term projects. These investments will be directed toward upgrading urban infrastructure, such as underground pipelines, and expanding high-speed rail and other public transportation networks. These moves align with the government’s broader strategy of stimulating domestic demand, particularly as external markets show signs of fatigue.

This transition from a growth model rooted in heavy industry to one driven by innovation and sustainability will require careful management. To ensure stability in the interim, the government is also focusing on stabilizing the real estate sector – a crucial driver of past growth. 

Policies aimed at lowering mortgage rates and easing restrictions on property purchases reflect a balancing act between averting a sharp downturn in the housing market and steering the economy toward a more diversified and sustainable base.

China's policymakers are under no illusion about the challenges ahead. Perseverance will be critical in navigating both domestic and international obstacles. 

The global economic environment remains fraught with uncertainty: the International Monetary Fund projects that global growth will slow to just 3.2 percent in 2024, posing a significant threat to China’s export-driven industries.

Despite these obstacles, China is pressing ahead with its industrial and technological upgrades, which are seen as the future drivers of growth. 

The government is heavily promoting high-tech manufacturing and energy security, ensuring that key national projects are prioritized through special exemptions on energy consumption. 

Finance Minister Lan Fo’an on October 12 emphasized that China will not shy away from issuing long-term bonds, including the newly announced issuance of 1 trillion yuan in ultra-long-term special bonds to finance major national projects that support this transition.

Domestically, the real estate sector – long a pillar of China's rapid growth – continues to face serious challenges, including slowing demand and rising defaults. In response, the government has introduced a range of policies to stabilize the sector, including lowering mortgage rates and loosening restrictions on home purchases. These measures are designed to prevent further deterioration in the housing market while maintaining a focus on long-term stability.

Beyond these measures, China is also turning its attention to the pressing issue of local government debt, a critical component of the country's fiscal landscape. 

The central government has committed substantial resources to assist local authorities in managing their debt, particularly through new bond issuances designed to refinance existing obligations. This effort, coupled with targeted fiscal policies, signals a clear determination to preserve financial stability at both the national and local levels.

Therefore, China's latest stimulus package reflects a careful balance between ambition and pragmatism. 

The leadership's passion for high-quality growth, driven by a focus on domestic consumption and private enterprise, is clear. 

But this passion is tempered by the recognition that structural reforms will take time, requiring patience from both policymakers and the public. In the face of both global and domestic headwinds, perseverance will be crucial as China navigates its economic challenges and strives to maintain its growth trajectory.

The road ahead is unlikely to be smooth, but the focus on long-term sustainability and resilience suggests that China's economic strategy is built for endurance. Whether these policies will ultimately deliver the desired outcomes depends on how well Beijing can balance short-term needs with long-term goals, all while fostering the critical elements of passion, patience and perseverance.