(Bloomberg) -- Chinese Premier Li Qiang vowed to “listen to the voice of the market” when formulating economic policies, in a rare nod to the concerns of the private sector and investors as Beijing seeks to shore up confidence and stabilize growth.
The No. 2 official made the remarks during a regular economic seminar with academics and entrepreneurs on Tuesday, the official Xinhua News Agency reported. He also pledged to respond to social concerns and lift sentiment in drafting policies in the meeting, attended also by Finance Minister Lan Fo’an and central bank Governor Pan Gongsheng.
“We must get a clear understanding of the major trends and strengthen our confidence, while also facing up to the difficulties, responding to them actively, and effectively addressing prominent issues in economic operation,” Li was quoted as saying.
Li’s comments came as China’s world-beating stock rally lost steam after its economic planning agency announced weaker-than-expected stimulus measures in the government’s first briefing following a weeklong holiday.
Onshore stocks fell as much as 7.4% after gaining in the previous 10 straight sessions, before paring losses on the government’s announcement of a Saturday briefing to introduce moves to strengthen fiscal policy. Chinese shares trading in Hong Kong continued to drop following their worst day since 2008 on Tuesday.
Typically held every quarter, the Tuesday session was the first time Li explicitly promised to listen to the market, a phrase that loosely refers to companies and market participants. The seminar’s attendees include experts in fiscal policy, real estate and finance as well as tech and industry business representatives.
Bruce Pang, chief economist for Greater China at Jones Lang LaSalle Inc., said it could be a signal the government wants to improve communication with the market.
“From listening to the markets before setting policies to explaining them after they’re set, communicating with markets well could make the process smoother,” he said.
Li’s remarks also reflected a more cautious assessment of the economy, in line with recent calls by the Communist Party’s top decision-making body to take a “sober view” of the challenges confronting the world’s second-largest economy. Li said it was “progressing with stability,” compared to more upbeat descriptions in the last three meetings where he said the economy “kept improving and rebounding.”
Li’s efforts to assuage public concerns underscored Chinese leaders’ renewed urgency to boost growth after gross domestic product grew at its slowest pace in five quarters. Officials stepped up support late September with a barrage of measures — from monetary easing to support for the real estate sector and stock market — moves that fueled a 26% surge in Chinese shares.
The stimulus bonanza came as sluggish economic data in recent months showed this year’s growth target of around 5% was increasingly out of reach. Rising trade tensions are also threatening new growth drivers such as exports of electric vehicles.
Markets are clamoring for Beijing to roll out more stimulus in the form of increased government borrowing and spending. While the National Development and Reform Commission disappointed on Tuesday, investors are focusing on an upcoming briefing by the Ministry of Finance, which is typically tasked with issuing bonds to fund stimulus measures and additional spending.
Although many investors and economists in recent years have called for more aggressive stimulus, Beijing until recently had appeared reluctant to adopt drastic demand-side easing measures. Officials are wary of side effects from previous efforts, including a climbing debt pile, and are seeking to shift the economy’s growth drivers away from property and infrastructure to technology and manufacturing.
Li acknowledged private businesses’ concern over arbitrary fines from authorities, echoing the NDRC’s vow to crack down on excessive penalties collected by indebted local governments to plug their deficit.
Among the attendees, Luo Zhiheng, chief economist at Yuekai Securities and a well-known expert on fiscal policy, stood out for his focus on fiscal policy. Luo recently suggested China could revise up the fiscal budget deficit for this year to ensure enough government spending, which could offset shrinking public income from land sales and taxes, according to Chinese media.
Declining government spending has been a drag on economic activity. China’s broad budget expenditure shrank 3% in the first eight months of this year from a year ago.
On economic planning for next year, Li said China will study a number of policy measures to stabilize growth and promote development, according to a CCTV report, adding the government would launch them in a timely manner.
--With assistance from Twinnie Siu and Fran Wang.
(Updates throughout.)
©2024 Bloomberg L.P.
