China’s government tried Wednesday to reassure jittery investors of its stability, as it promised to roll out policy steps favorable for its economy, including its capital markets, struggling real estate industry, internet companies and entrepreneurs who want to raise money abroad after regulatory crackdowns caused stock prices to plunge.
Regulators should issue market-friendly policies to "invigorate the economy," officials said at a Cabinet meeting led by Vice Premier Liu He, President Xi Jinping’s top economic adviser, according to the official Xinhua News Agency.
Liu said Beijing would roll out support for the Chinese economy and be cautious with measures for capital markets.
The ruling Communist Party is trying to revive economic growth that slid to 4% in the final quarter of 2021, compared with the full year’s expansion of 8.1%. That was triggered by a collapse in construction and housing sales after Beijing launched a crackdown on debt in real estate that officials worry is dangerously high.
The economy also is under pressure from anti-coronavirus measures that shut down the southern business center of Shenzhen and other cities. That has fueled worries about possible disruption of manufacturing and trade.
"All policies that have a significant impact on capital markets should be coordinated with financial management departments in advance to maintain the stability and consistency of policy expectations," Liu said.
China encourages long-term institutional investors to increase stock holdings, he said, after China’s blue-chip index closed at 21-month lows in the previous session.
The government will also promote the steady and healthy development of the platform economy and will steadily push forward and complete rectifications of big platform firms as soon as possible, Liu added.
China will take measures to boost the economy in the first quarter and monetary policy should embark on initiatives to support the economy, Liu was also quoted as saying.
The government will take forceful and effective measures to prevent and resolve risks in the property sector, he said.
Regulators in mainland China will step up their communication and coordination with Hong Kong regulators on financial market stability, Liu said.
China’s second leader, Premier Li Keqiang, said last week the government hopes to generate as many as 13 million new jobs this year but faces "many difficulties and challenges." Forecasters say the ruling Communist Party is likely to struggle to meet its official 5.5% economic growth target, the lowest since the 1990s.
The main stock market indexes in Shanghai and Hong Kong have slid by more than 10% this year after the debt crackdown. Tighter control of internet industries and a spat with Washington about oversight of Chinese companies with shares traded on U.S. exchanges have added to pressures on the leadership.
Liu "spoke to stop the stock market rout," Larry Hu and Xinyu Ji of Macquarie Group said in a report.
"The tone of the meeting is strong, suggesting that policymakers are deeply concerned about the recent market rout," they said.
Share prices of some companies including e-commerce giant Alibaba Group have fallen by almost half on foreign stock exchanges since the start of last year after they were hit by anti-monopoly and other investigations.
Chinese stock markets rebounded after the announcement. Hong Kong’s Hang Seng index soared 9.1% while the Shanghai Composite index advanced 3.5%.
Hong Kong-traded shares in Alibaba jumped 25.8%. Tencent Holdings, operator of the popular WeChat message service, surged 23%. Livestreaming site Kuaishou Technology added nearly 34%.
Xi’s government has promised to support entrepreneurs who create China’s new jobs and wealth. But companies and investors are uneasy following a spate of anti-monopoly and data security investigations, multimillion-dollar fines and public criticism of internet companies.
More broadly, world markets are in a particularly volatile state given the uncertainties brought by Russia’s invasion of Ukraine, which has pushed commodity prices sharply higher and raised risks of still more disruptions to trade at a time when economies are just beginning to recover from the pandemic.
The meeting of the Cabinet’s financial stability committee promised to "propose supporting measures" for the real estate market, Xinhua said, though it gave no details of possible initiatives.
Housing sales and construction, industries that support millions of jobs, plunged last year after Beijing's debt crackdown. The government has tried to revive demand by telling banks to lend more to home buyers, but economists say Beijing is moving cautiously to avoid igniting a rise in housing costs and debt.
The agency that regulates Chinese banks and insurers promised in a separate announcement to encourage lenders to "support development of the real economy" by maintaining moderate loan growth.
It promised to support the "healthy development" of real estate while repeating the official slogan that housing is "for living, not for speculation."
The agency said China’s state-owned insurers would be encouraged to increase investment in stock markets.
The Cabinet officials promised to coordinate more closely on policies that will affect financial markets and to move cautiously on carrying out any that might disrupt them.
The government "will promote the development" of internet industries and improve their competitiveness, Xinhua said, while giving no details.
Beijing will "continue to support overseas share listings," the report said.
It said Chinese and U.S. regulators are having a "good dialogue" about stock markets and working on a plan for cooperation following disputes over audit requirements that led to a threat to kick some Chinese companies off American exchanges.